Russia’s car market is heading for a challenging 2026, with higher scrappage fees set to push new car prices to record levels, industry experts warn. While October 2025 saw a temporary surge in vehicle purchases, analysts say this was driven by buyers rushing to beat the upcoming price increases, rather than a sign of genuine recovery in the country’s automotive sector.
Weak Recovery Signals in Russia’s Auto Market
As 2025 comes to a close, Russia’s car market shows only faint signs of recovery after years of decline. The jump in new car sales during October is largely a result of consumers accelerating their purchases to avoid higher charges, reflecting short-term buying behavior rather than sustained growth.
The struggling market underscores structural challenges that have plagued the Russian automotive industry since the 2022 invasion of Ukraine. Once considered one of Europe’s fastest-growing car markets with potential annual sales of up to 4 million vehicles, Russia has been hit hard by:
- The exit of Western car manufacturers
- High interest rates inflating the cost of auto loans
- Slowing consumer purchasing power due to broader economic weakness
Industry analysts predict that these challenges will continue to impact the market into 2026, leading to further price hikes and lower sales volumes.
Rising Scrappage Fees and Their Impact
Starting December 1, Russian authorities will sharply raise recycling fees for powerful and expensive cars, most of which are imported by private buyers. From January 1, 2026, the fee will increase for all vehicles by roughly 10%, in line with inflation.
Despite its name, the “scrappage fee” does not directly fund recycling programs. Instead, it functions as a protectionist measure to support domestic manufacturers such as Avtovaz, which has reduced production to a four-day workweek to manage inventory.
While both local and imported carmakers are subject to the fee, Russian brands receive subsidies, giving them a pricing advantage over foreign models. Nevertheless, consumers across all segments are expected to feel the impact as car prices climb.
October Sales Spike Ahead of Fee Hikes
In anticipation of the scrappage fee increase, new car sales in October surged by 35% compared to September, reaching 165,702 units, according to the Russian analytical agency Autostat. However, this figure remains 3.2% below the same period in 2024.
The average cost of a new car reached an unprecedented 3.43 million roubles ($42,189), highlighting the growing financial pressure on buyers.
Structural Decline in Market Volumes
Following the initial decline to post-Soviet lows in 2022, the Russian car market saw a modest rebound, with Chinese car brands emerging as major winners. In 2024, Chinese manufacturers sold nearly 1 million cars in Russia out of total sales of 1.57 million units.
However, 2025 has seen a downward trend. Sales in the first ten months fell by nearly 20%, totaling 1.06 million vehicles. Analysts expect annual sales to remain below pre-crisis levels despite a year-end surge.
“Annual volumes are already near critical lows at about 1.3 million units,” said Alexei Podshchekoldin, president of the Association of Russian Automobile Dealers. January and February 2026 are forecasted to see sales drop 5–10% as most buyers already purchased vehicles in 2025 to avoid higher fees.
VAT Hike Adds Further Pressure
The looming increase in Russia’s value-added tax (VAT) from 20% to 22% in 2026 is expected to further strain buyers’ budgets. This move is part of government efforts to boost revenue amid rising military spending and a widening budget deficit.
Denis, a buyer who recently purchased an Infiniti QX50, shared his experience: “If I had waited, it would have cost me about 7.2 million roubles instead of the 6.5 million I paid. The scrappage fee was exactly the reason why I decided to buy now. Prices are unreasonable, but I wanted to buy before things got worse.”
Outlook for 2026
The combination of rising scrappage fees, VAT hikes, and an overall sluggish economy is expected to weigh heavily on Russia’s automotive market in 2026. Dealers predict that while short-term spikes in sales may occur due to fee avoidance, overall demand will remain low, keeping volumes near post-Soviet lows.
The long-term recovery of Russia’s car market will likely depend on government policy adjustments, domestic manufacturing incentives, and broader economic stabilization. Until then, buyers should brace for higher prices and limited options, particularly in imported vehicles.
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