Exclusive-Russians use Chinese partner to produce Citroen cars at idled Stellantis plant By Reuters

By Gleb Stolyarov and Alexander Marrow

(Reuters) – Carmaker Stellantis (NYSE:) halted production in Russia in April 2022.

But the decision did not stop Russian operators from joining forces with a Chinese partner the following year to start making new versions of Stellantis’ Citroen models, according to customs data and two people familiar with the matter.

In December last year, Russian company Automotive Technologies imported at least 42 car kits for assembling the Citroёn C5 Aircross model at the Kaluga plant, which is still majority-owned by Stellantis, customs records drawn from a commercial trade data provider showed.

Manufactured in China, the kits were produced by China’s Dongfeng Motor Group, the data showed.

Automotive Technologies was assembling the Citroёn C5 Aircross at the Kaluga factory, according to two employees at different Russian car dealerships. The sources spoke on condition of anonymity because the information is not public.

It is not clear if the kits from China contained parts that fall under the scope of Western sanctions on Russia, to which Beijing is not a party, and there is no suggestion from the customs data or sources that Stellantis knew about the imports.

But the findings highlight the lack of control Western companies such as Ikea or Carlsberg (CSE:) now have over their brands after suspending Russian operations or leaving the country after the February 2022 invasion of Ukraine.

They also demonstrate Moscow’s increasing dependence on Beijing, particularly in the car industry.

In response to Reuters’ findings, Stellantis said it had concluded since Dec. 31, 2023, that it has “lost control of its entities in Russia.”

Stellantis said it had recognised a loss of 144 million euros ($154.53 million) as a result, including the loss of 87 million euros of cash and cash equivalents.

Chinese state-owned Dongfeng, Russia’s industry and trade ministry and Automotive Technologies did not respond to emailed requests for comment.

Russia’s auto industry had been heavily reliant on investment, equipment and parts from overseas, particularly Europe.

Stellantis blamed logistical difficulties and the sanctions imposed on Moscow when it halted operations. It owns 70% of the Kaluga plant with the remaining 30% held by Mitsubishi Motors (OTC:). Prior to Russia’s invasion of Ukraine, the factory produced Peugeot (OTC:), Citroen, Opel and Mitsubishi cars with an annual capacity of 125,000 vehicles.

PARALLEL IMPORTS

Although many foreign carmakers have since left the Russian market, some supplies continue to make their way to the country through a “parallel imports” scheme introduced by Moscow. That allows importers to bring in products from abroad without the trademark owner’s permission.

Citroen models continue to be available for sale in Russia, four Russian car dealers told Reuters.

In December 2023, the Kaluga plant’s operators hosted an official launch for the “production of medium-sized crossovers.” Reuters was not invited.

Automotive Technologies, a company registered in Moscow in March 2023 and 100% owned by Galina Dolgolenko, said in December it was assembling a pilot batch of 48 imported cars, ahead of mass production beginning in 2024, but did not name the supplier or model of car.

Pavel Bezruchenko, Automotive Technologies’ strategic development director, was quoted in the Russian newspaper Vedomosti in December as saying the company brings in cars from China using parallel imports.

Bezruchenko did not answer the phone or reply to messages seeking comment.

Two car dealership employees told Reuters that Automotive Technologies had informed them that they would be receiving Citroen C5 Aircross models, assembled in Kaluga from imported kits.

However, it was not clear whether the cars rolling off the production line would retain the Citroen brand.

In 2022, Russia revived the Soviet-era Moskvich car, but sources told Reuters the Moskvich 3 model was a Sehol X4 made by JAC Motors, assembled in Moscow using kits purchased from a Chinese partner.

Dongfeng and Stellantis, the world’s third-largest automaker by revenue, operate a commercial joint venture in China, through which Dongfeng can build and sell Stellantis cars in China.

Chinese carmakers have been plugging the gaps left in Russia by their departing Western competitors, but sales of Chinese cars appear to have peaked at more than 56% of the market as Russia’s domestic production slightly recovered.

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