More than just people are fleeing Ukraine’s aggressor. Some brands, but not all in the global aftermarket community, have either halted or severed ties with Russia following Vladimir Putin’s military campaign to reclaim the former Soviet republic. 

Since the Feb. 24 invasion of Ukraine, the second-largest country in Europe after its Russian invader, Alexander Gruzdev has been monitoring the unfolding crisis that has steadily affected Russia’s driving population. Gruzdev, a Moscow native who runs Gruzdev Analyze, a consultancy in Los Angeles, believes that the Russian vehicle aftermarket will not likely suffer, at least in the near term. 

Do-it-yourself car culture keeps cars operational

Hardwired to economic hardship, the parts resellers are used to working around product shortages. One reason, explains Gruzdev, is that decades before the conflict exploded, a large chunk of the independent segment built a home-brewed style do-it-yourself car care culture, primarily out of necessity. Due to limited choices of professional installers and dealerships, which are less prevalent in Russia than in the United States, self-reliance is needed to keep their vehicles operational. This mindset is rooted in the Communist Russia era, where complete services and quality-made goods were hard to find. “There were no workshops. So, if you owned a car, you needed to maintain it somehow yourself,” Gruzdez said. 

Almost daily over social media, Gruzdev indulges his followers about the latest run of events impacting the Russian car parc. He chooses not to reveal his intel sources. The self-described sales market intelligence operative prefers to maintain close contacts with the world’s tier-one auto suppliers as everyone tries to figure out their next move in Europe. 

Mostly on balance, Russia buys more finished motor parts than it produces. In 2020, the United States exported $466 million in automotive components to Russia, up 4 percent from 2015, according to the Auto Care Association Factbook. Vehicle dealerships function as the frontline distribution stream to service the country’s 53 million registered vehicles. It’s unclear how many independent repair shops exist in Russia, whose landmass is 1.8 times the size of the United States. 

Because of shaky infrastructure and sporadic capital market reforms carried forward by President Putin, trade links to the West are comparatively underdeveloped in terms of an entire car parts inventory. Just-in-time inventory required on a need-only basis by the vehicle technician has been the dominant model for years, said Gruzdev, who spoke with Aftermarket Business World by video conference. “Ninety percent of the dealer parts needs are covered within one-day delivery.” 

With scores of manufacturers stopping local production and others outside of Russia cutting the parts supply, the dealerships and the independent aftermarket are headed toward a greater product stockout. “The dealers have a lot of problems. First, there is no supply, and next, there is no old stock.”   

“Due to a number of external factors, including supply chains and other matters beyond the company’s control,” General Motors told the Detroit Free Press on Feb. 28, the date the company ceased doing business in Russia.  

Other popular nameplates like Volkswagen, BMW, Ford and Honda followed GM’s decision, Gruzdev noted. 

That leaves individual car owners and shops with a diminished list of choices. Typically for them, the shopping journey begins over the internet, which may be followed by a trip to a merchant who mainly stocks tires or motor oil but not much more. General product availability in those categories is becoming increasingly scarce in keeping with Gruzdev’s observations.  

Consequently, on the back end, independent wholesalers and distributors are temporarily better off than the dealers, Gruzdev said. One reason is that they have built up a larger surplus of non-OEM product lines. 

Nearly 200 companies, including a handful in the automotive aftermarket industry, are digging in rather than exiting Russia, according to a study released in April by the Yale School of Management. Denso, the maker of diesel fuel injection pumps in Russia, has opted to "curtail most or nearly all operations, while keeping return options open," according to the study, while Tenneco, a producer of powertrain units, is staying put. 

How long the wholesale segment will hold out depends on how quickly the remaining manufacturers can maintain output. Raw material transfers and logistical support are bound to slow activity if countries still trading with Russia are under constraints. “By the end of June, we will have a lot of problems with parts,” Gruzdev said.

Another advantage favoring the independent aftermarket is the installers’ will to manage without full-service auto parts stores, something that North American repairer shops generally expect. Finding components on the grey market or accepting poorer quality parts is commonplace despite improvements in the past two decades, explained Gruzdev. He says that global lines like KYB, Bosch and Delphi were making their appearance in the Russian marketplace about the same time the government began forging joint venture relationships with the West. 

Then came the war.  

Concern over parts being used for military purposes leads to suspension in production

Given immense international pressure, Bosch, a German-based parts manufacturer, suspended its plant production of truck parts in Russia due to the concern that the military could use the inventory for non-civilian uses, Reuters reported in March. 

“The wholesalers will need to find the links and contacts with those countries which don’t support the sanctions and embargos,” said Gruzdev. To fill the void, he suspects that the wholesalers will look to eager sellers in China or Turkey. Some may rekindle old buying relationships with former vendors that can provide three-step distribution. 

“The Turkish and Chinese manufacturers are happy,” said Gruzdev. “In the next few months, they won’t need to compete for do anything, because the market is empty.”   

Yet not everybody is taking a united stance against Russia. A full embargo on Russian petroleum may prove too costly for Germany to break free of its supplier of more than $27 billion in total goods. Even though Germany shuttered the Nordstream 2 fuel pipeline, substituting Russian fuels at the same prices could be hard to replace, putting Europe’s mightiest economy in an awkward position over the Ukraine war. 

“So, it’s quite a big problem for Germany if they decide to ban Russian gas, because they will have to stop a lot of manufacturers, plants and factories.”