Chery’s Shocking Russia Retreat: Why the Market Leader is Abandoning its Empire

The Poisoned Chalice: Why Chery is Staging a Strategic Retreat from Russia

On the surface, Chery Automobile is the undisputed king of the Russian car market. In 2024, the Chinese automaker sold nearly 325,000 vehicles, capturing almost a fifth of the entire market share. They built a massive footprint with 372 dealerships and 687 showrooms. By all metrics, this is a story of stunning success.

However, recent reports indicate that this champion is planning a full, phased withdrawal from Russia by 2027, with the process of selling off assets having already begun. This begs the question: Why would a company at the peak of its success abandon its conquered territory?

The answer is complex, revealing that Chery’s dominant position may be a poisoned chalice. This move isn’t a surrender; it’s a calculated

strategic contraction driven by a hostile policy environment and severe geopolitical risks.

Russia’s Policy Wall: A Triple Threat to Profitability

The primary driver behind Chery’s decision appears to be a series of aggressive policy changes from Moscow designed to protect its domestic industry, creating a hostile environment for importers.

• Soaring Scrap Taxes: In late 2024, Russia hiked the scrap tax on imported vehicles by a staggering 70-85%. With plans for further annual increases, this policy directly decimates the profit margins of imported cars.
• Crippling Certification Barriers: New regulations in 2025 mandate that all imported cars must be certified in Russian-owned laboratories. This extends the certification process to a full year and doubles the cost, creating a significant barrier to entry and slowing down the introduction of new models.
• Parallel Import Restrictions: Moscow has also tightened policies on parallel imports, a channel Chinese automakers previously leveraged, now requiring back-payment of customs duties and VAT.

The Geopolitical Tightrope: Sanctions and Technology Fears

Beyond direct costs, the geopolitical landscape presents an even greater long-term threat. Chery’s success in Russia could jeopardize its ambitions in the rest of the world.

In its own IPO prospectus,

Chery officially cited the risk of secondary sanctions—particularly those related to the Russian transport sector—as a key reason for reducing the scale of its business there. The potential of being locked out of Western markets is a price too high to pay for Russian market share.

Furthermore, Russia has been pressuring Chinese automakers to share core technologies and establish local production. For Chery, the risk of intellectual property theft and the potential blowback from international partners makes this an unacceptable proposition.

Russia’s Contradictory Game: The “Use and Restrict” Dilemma

Russia’s government is playing a contradictory game. On one hand, it desperately needs Chinese vehicles to fill the massive void left by Western brands, with Chinese cars accounting for 61% of the market in 2024. On the other hand, it is fiercely protective of its domestic champions like Lada.

This has resulted in a “use and restrict” strategy, where Russia leverages Chinese imports to stabilize its market while simultaneously erecting barriers to prevent them from becoming too powerful. For companies like Chery, this unpredictable environment makes long-term investment and strategic planning nearly impossible.

Conclusion: A Strategic Retreat, Not a Defeat

Chery’s withdrawal from Russia should not be seen as a failure. Instead, it is a pragmatic and strategic retreat from an increasingly volatile and unprofitable market. The company is choosing to cut its potential losses and mitigate severe geopolitical risks rather than engage in a losing battle against protectionist policies.

This serves as a crucial lesson for the global automotive industry. Market share alone does not equal success. Chery’s story is a powerful case study in how political winds can shift, turning a golden opportunity into a strategic liability. The real challenge for Chinese automakers is not just conquering new markets, but learning how to navigate their complexities sustainably.