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You are about to read the first issue of the France-Russia Automotive (L'Auto Franco-Russe) publication, an economic newsletter focusing on the development of the Western automotive groups’ business in Russia.
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France-Russia Automotive is published by Agence du Fil SARL Company, whose publications are devoted to the Franco-Russian trade.

Specializing in spare parts for European cars, the Auto Distribution network is amongst the largest networks in its sector in Russia. It is made up of three independent companies with different owners (at least in theory): Smartek and Moskvorechie in Moscow with 9,900 and 3,400 m² of warehouse space respectively, and Koleso Fortuni in St Petersburg with 7,000 m². AD Russia also has a presence in eleven other towns with regional warehouses.
The three companies that form the network represent themselves to AD International as a single entity, with the title of Premier Automotive Group, of whom the president is Mr. Guennadi Korolkov. PAG’s central office oversees coordination and marketing operations with the AD structure.
The network is currently limited to the Russia’s European side, extending to the Ural region, with the exception of the town of Novossibirsk in Siberia. Expansion towards the country’s Asian regions is a possibility. Olessia Vershinina, marketing manager for AD Russia, explains that, “Several networks established in Siberia have asked to join the group but they are not yet big enough. As for the Far East, the market has is somewhat particular in that vehicles are imported directly from countries in the region, especially Japan, and are often right-hand drive”.
PAG - AD Russia does not offer car-body parts or tyres for the time being. Olessia Vershinina comments, “Tyres may eventually come. The owner of a Mercedes is obviously not going to want Russian made tyres. It is a question of warehouse capacity and of being sure of having enough margin on products from large manufacturers such as Goodyear and Michelin”. AD Russia currently works with a hundred European and Asian suppliers. The Russian network can also list suppliers other than those already listed by AD at the international level.

The Finnish tyre manufacturer Nokian Tyres has been importing its products into Russia since 1964. It is due to this long established presence and the excellent reputation of its winter tyres, which were in fact invented by the company, that Nokian is now one of the most well known brands in Russia. Russia has been the Nokian Group’s largest geographical market since 2005, ahead of Finland and the United States.
The Group’s share of the Russian premium tyre market grew from 20% in 2004 to 25% in 2005 (spread between 30% for the winter tyres and 10% for summer tyres). Nokian’s growth reached 35% in terms of volume for the first quarter of 2006.
Andrei Pantioukhov, the managing director of Nokian Shina LLC, thinks that the trend will continue, “The Russian car market is booming, with a very dynamic level of penetration of foreign brands. The changes in the market’s structure are very positive for manufacturers of premium tyres such as Nokian. Overall the tyre market grew by 8% in 2005 while premium tyres increased by 20% and growth for Nokian approached 40%. We are benefiting more from the growth in the Russian car market than our competitors. We specialize in winter tyres. Every time a new car is sold the owner automatically buys a set of winter tyres”.
The other key factor in the significant success of Nokian’s strategy in Russia was the decision to build a green field factory in Vsevolozhsk in the Saint Petersburg region. The project was finalized in less than eighteen months.
“The factory is now running at full capacity with the production of 1.9 million tyres planned for 2006. Additional capacity will gradually be added to push production to four million tyres by 2008”. So far 100 million euros has been invested in the factory and at least 30 million euros per year will be invested between now and 2008.”
Production in Vsevolozhsk is mainly planned to be sold on the Russian market: “The growth in demand in the Russian market and increase in Nokian’s market share in Russia should absorb most of the production...Russia has become the Group’s largest geographical market, ahead of Finland and the United States”.
The next stage of Nokian’s strategy in Russia will be the expansion of its distribution network: the Group currently has a network of thirty-nine franchises. Its objective is to reach one hundred franchises by the end of 2007, which, according to Andrei Pantioukhov, would be an ideal size: “The choice of franchises enables us to expand without heavy investment while at the same time benefiting from the involvement and energy of the individual contracting parties”.

l Nokian Tyres in Russia :
- Turnover of around 120 million euros in 2005
- 18 logistics centers and 39 points of sale through Vianor (August 2006)
- 25% share of the premium tyres market
- One factory in the Saint Petersburg region with 270 employees
- Two (and soon three) production lines operating 24/24
- Production of 6,000 tyres per day

Great Wall has declared itself the victim of a conspiracy hatched by local bureaucracy. In March 2006 the Chinese manufacturer announced its intention to build a factory in the Alabouga “special economic zone” in the Tatarstan region. The site was to assemble the Hover 4x4, which has since been shown at the Paris International Motor Show. The manufacturer, which sold 8,000 cars in Russia in 2005, was planning an annual production of 50,000 cars with an investment of about 70 million euros.
Special terms were available in the economic zone, including exemption from various taxes for ten years, a tax rate of 20% instead of 24% and regional investment in the development of infrastructures.
However, the Russian administration quickly became hostile towards the project. It was delayed at every stage by the various ministries and bureaucrats let it be understood that the Chinese 4x4 assembly project did not meet the requirements for installation in a special economic zone. At the same time, the Russian business man Alexei Mordachov’s holding company, Severstal, the rejected suitor of Arcelor, announced its intention to set up a Severstal-Avto factory in the Alabouga special economic zone, with the objective of producing 4x4s, amongst other models. The project received an enthusiastic reception from the various administrations involved in the decision, which was hardly surprising, given the friendship between Mr.Mordachov and President Putin.
During this time the Great Wall affair began to create rumors among investors, to the extent that Guerman Gref, the liberal minister of the Economy, became concerned. In mid September he announced that he was going to personally sort out certain unresolved issues involving his ministry’s pen pushers and the administration in Tatarstan. The results of his enquiries are awaited with interest.

“In marketing surveys the Amtel brand scores 71% in terms of recognition by Russian consumers”, declares a delighted Pavel Smirnov, the marketing director of Amtel-Vredestein, one of the leaders in the Russian tyre market. His company is one of the three market leaders and has gained further notoriety by bidding for a European manufacturer: in April 2005 Amtel acquired the Dutch company Vredestein Banden, for nearly 220 million euros. Vredestein’s top of the range tyres are mainly sold in Europe.
What was the purpose of the acquisition? “By buying Vredestein we bought technology and management experience. It was expensive, but obtaining them by other means would have taken too long,” acknowledges a spokesperson at Amtel. The market does not wait. According to its own figures, Amtel-Vredestein currently has 18% of the private car market, while its two main competitors, Sibur and Nizhnekamskshina, each have 15%. However, the local tyre manufacturers mainly supply low-end products to the C segment, involving cars of Russian design, AvtoVAZ Ladas and other brands no longer in production. These vehicles are ageing and their numbers are reducing: 17% of this category consists of cars that are twenty years old or more. The C segment is in a state of natural decline, from 80% of the market it has decreased to 60% in recent years. Margins for tyre manufacturers are very low in this “budget” sector.
The cars coming in as replacements are more likely to be in the B segment. The middle classes, today’s great car consumers, are no longer persuaded solely by price. “They look for quality and functionality, they want tyres suited to driving conditions, to the country, the city, to speed, for aquaplaning”, observes Pavel Smirnov. Amtel is increasingly targeting this B segment in which they are beginning to compete with brands such as Kleber, Barum and Matador. The tyre manufacturer is also keen to apply itself to supplying manufacturers at the assembly stage. Its tyres are already on Kia Spectra's assembly lines, in competition with other brands, since factories in Russia do not like to restrict themselves to a single supplier.
The development of the distribution network and associated services is in progress. Tyres are seasonal products in Russia and two ranges have to be juggled: summer tyres and winter tyres, which are often studded. To fill shops and assembly centres between the seasons Amtel-Vredestein plans to offer batteries, windscreen wiper blades and other products in its network of 102 Av-To centres. Pavel Smirnov is counting on following the example of the rapid assembly chains, in particular Britain’s KWIK-FIT (which owns Speedy in France). Other acquisitions are planned and some have already been finalized, notably the purchase of PigMa, the wholesale car parts distributor, which has a storage facility in Nijni Novgorod and offers a catalogue of 27,000 items to 1500 customers in Russia and neighbouring countries. Pigma is in the process of acquiring Megashina, a tyre wholesaler which sells up to 600,000 tyres per year from its eighteen logistics platforms, and which has recently become the master franchisee of the French Point S (see interview below). The integration of these new distribution networks will be central to Amtel-Vredestein’s development in the following months.

Less than 5% of the 2,000 local car industry suppliers meet quality standards and the number of faults found in locally made components is ten times more than industry requirements, according to declarations from Andrei Reus, the interim minister of Industry.
AvtoVAZ, the country’s main manufacturer is the main victim of this state of affairs: according to the manufacturer, between 70% and 75% of faults in Ladas produced by AvtoVAZ are due to faulty parts from suppliers. The lack of quality is the reason that the manufacturer is seeking to impose “house” quality control and increasingly strict standards on its suppliers. In the past, AvtoVAZ demanded certification by institutional bodies. This method did not enable the required quality to be achieved. AvtoVAZ has just created an internal quality certification centre with the objective of imposing a new approval system on its suppliers. Manufacturers of electrical and electronic parts are among the first candidates for the certification. AvtoVAZ is inviting other national manufacturers such as GAZ, OuAZ and Serverstal Avto to participate in this new approach.
The AvtoVAZ factory currently uses mainly local suppliers and a few foreign suppliers for plastic parts and seat belts. The manufacturer has set up an electronic purchasing platform on http://postavka.lada-auto.ru/ and is planning to organize an exhibition of car parts with a view to attracting new foreign suppliers. The exhibition will take place at the Car Show in Samara, from 18 to 20 April 2007.

The local department of the Ford Motor Co has not been able to follow its schedule for the localisation of suppliers, to the dissatisfaction of the tax authorities. Ford was the first manufacturer to set up an assembly operation in Vsevolozhsk in the St Petersburg region in 2002. The company benefited from a special customs regime allowing it to bring in parts without paying duty, on the condition that production of 50 % of the parts for the Ford Focus was localized within five years. 40% should have been localized by June 2006 but Ford has only managed 35%. The Customs Board has therefore demanded back payment of taxes since the factory's construction, amounting to 11.5 million euros. Ford has submitted the matter to the federal government, asking for the agreement to be reviewed and that the company benefit from more flexible conditions in the context of the new regulations on “industrial assembly” adopted in 2005. A review of the conditions of the investment agreement has been granted but Ford was obliged to pay all of the back dated customs duty. The manufacturer is taking the matter to court in order to obtain reimbursement.

“We have recorded 50% growth in the high speed tyre segment, while in the low price segments our market share has decreased”, reports Aimone di Savoïa Aosta, the managing director of Pirelli Tyres Russia.
The Italian manufacturer likes to recount how its relationship with Russia began in the nineteenth century with deliveries of rubber goods, and continued in the 1970s with a transfer of technology to the tyre factory in Nizhnekamsk. A second transfer took place in 2001-2002. As for the brand’s products, they were sold via a network of importers up until 2005. Since then Pirelli has established itself more firmly by creating a company under Russian law. It has even distributed a hundred copies of its famous calendar: “I could have sent out a lot more - demand is enormous,” smiles Aimone di Savoïa Aosta.

l Who is Pirelli in Russia ?
The manufacturer currently accounts for 8% to 10% of imports by volume, which puts it in sixth place in Russia, according to its own analysis. Pirelli is developing a network of local franchises called Key Point, with 48 points of sale on Russia’s European side, mainly around in Moscow. There are plans to expand towards Siberia.

For its future factory in Shushari near St Petersburg, Toyota has reserved 220 hectares, which is obviously much more than necessary. The manufacturer plans to use the land as a business park for suppliers. Production of Toyota Camrys should start in 2007.
The Japanese company Boshoku has just announced that it will begin producing seats directly in the Toyota factory before establishing its own site. Production should begin in December 2007 to equip the entire local production of Toyota Camrys, which will initially be 20,000 cars per year.
The Canadian company Magna International is also going to build a parts factory near the Toyota site. The company is investing 40 million euros. Work will begin in 2007. The site should produce plastic parts for interiors and car bodies, for the Toyota, Nissan and General Motors factories.

The car loan market is expanding rapidly. Western banks offer much more attractive interest rates in Russia for buying a car than for general loans. For example, the Austrian bank Raiffeisen, which is well-established in Russia, offers car loans at 9.5% over five years when the loan is in foreign currency, and at 14% over the same period when it is in roubles. By way of comparison, the same establishment’s rate for general loans in roubles is 16.5%, and can reach 23% or higher in other banks. Car loans are used to buy vehicles with a value of more than 10,000 euros, and thus are reserved for foreign brands.

The production of vehicles in all categories, combining all manufacturers, was 1,352,634 units in 2005, which was 2.6% less than in 2004. Most of the production was concentrated in the private car category, for which the total was 1,067,157 cars, corresponding to a decrease of 3.9% compared to 2004.
The production of locally designed models fell by 6.7% to 911,122 cars. These are almost all produced by AvtoVAZ, with 721,492 cars, which is more or less the same as it produced in 2004. The sale price of its Kalina models is between 4,000 and 8,000 euros, i.e. low enough to avoid competition with western cars. The other producers – GAZ, OuAZ, SeAZ and IZh Avto – have reported decreases in production of up to 30% in twelve months. Most have declared that they intend to stop production of locally designed models and redirect production towards the assembly of foreign brands, as is already the case with IZh Avto.
The production of foreign models assembled in Russia rose by 17.2% in 2005, to 156,035 vehicles.
Imports of foreign brands were around 450,000 units for new vehicles in 2005. As for imports of second hand vehicles, these are difficult to estimate because the statistics are distorted by the customs fraud that surrounds this activity.
The total market stands at about 1,500,000 new cars. The volume of sales of imported or locally assembled foreign cars was around 600,000 units in 2005, which represents 66% of the volume of local production.
For the first six months of 2006 the car market was worth about 10 billion euros, according to PriceWaterhouse. Growth was 14% compared to the same period last year.
Sales of locally designed vehicles increased by 1% in volume and by 4% in value for the same period. Foreign brands assembled in Russia saw a rise of 39% in volume and 53% in value. Sales of new imported vehicles were 418,280 units for the first six months of 2006.
It is likely that sales of new foreign vehicles that are either imported or assembled locally will be between 950,000 and 1,000,000 units in 2006, outstripping local brands for the first time.

Point S is the first European automobile services company to establish itself in the Russian market. The French network has signed a master franchise contract with the MegaShina Group, the country’s third largest distributor. Fabien Bouquet, director of international operations at Point S Développement, explains the project.

Auto Franco-Russe : Why did you choose Megashina ?
Fabien Bouquet : The group has eighteen warehouses with 75% coverage of the country. This was a very important, if not indispensable, factor among the selection criteria for our objective of a continuous logistic chain. Megashina is able to manage a stock and make products available to customers; they offer a comprehensive logistics and service operation. Their managers clearly understand the value of our partnership. Furthermore, their distribution set-up suits us: they act as wholesalers in direct contact with shops, without involving several levels of wholesalers or regional distributors. This corresponded to our vision as it enables us to maintain a consistent business policy.

- How did you find this partner?
The process took nine months. I did the rounds of the main players, approaching some directly and others with the support of the French Embassy.

- Will the Point S concept be applied in the same way to this market?
The European business model cannot be directly exported. It will have to be modified to accommodate cultural differences. We will almost certainly be adapting our concept over several stages, in accordance with the market’s maturity. An approach based on customer relations, the development of customer loyalty and direct marketing will come later.

- What is your analysis of car parts distribution in Russia?
The car parts market is more than 90% controlled by importers and wholesalers. There are no, or very few, structured brands. Apart, of course, from the Av-To network for spare parts, with which our master franchisee has a shareholder in common: Amtel, the tyre manufacturers.
We will target the independent entrepreneurs in this market, with the objective of uniting them under a brand. In the short term this will take the form of a dedicated local structure, Point S Russie. Megashina is already working on the creation of this company.

- You have worked in the Russian market for several years, how do you judge its potential?
I have also had the opportunity to work in the Chinese market and to compare it to Russia. I find the business environment more open in Russia, with more opportunities for French companies. As for the car market, there is currently a wait of six to nine months for vehicles at some dealerships. The number of cars on the road is increasing faster than the maintenance services network. The expectations of the owners of ageing Ladas are different from those of drivers of Ford Focuses. We have to be able to satisfy everyone.

- How do you establish good business relationships with your partners in Russia?
Contrary to the stereotypes, the Russians are a people who keep their word. The human side of the relationship is more important than the business side; it is at least as important as your business proposition. I would say it is a prerequisite. But contracts are also important because businesses tend to come and go fairly quickly. So it is always prudent to have something in writing.

l Who are Point S’s partners in Russia?
Point S has signed a master franchise contract with the MegaShina Group, the country’s third largest distributor with eighteen logistics platforms which, according to the company, sells up to 600,000 tyres per year to more than 500 customers. Due to a series of acquisitions MegaShina is now linked to Amtel-Vredestein, the largest tyre manufacturer in Russia. As part of the development of it retail department Av-To, Amtel has just acquired PigMa, the largest distributor of car parts, which belongs to the business men Mikhaïl Pigaev and Nikolaï Makarov. PigMa has a warehouse in Nijni Novgorod, its home town, and 1500 customers in Russia and neighboring countries; its catalogue lists 27,000 items. And Pigma is in the process of acquiring Megashina.
In the context of the master franchise MegaShina is going to create its own distribution network with the Point S brand and will offer the chain to its distributor customers. The target for geographical coverage is thirty points of sale by the end of 2006 and 250 by 2010 in Russia’s thirteen main cities. Initially the network will only provide tyres for private cars. All the points of sale will be brought in line with standards within six months. Megashina will offer future franchisees a loan in partnership with a local bank to open the Point S franchise. (Business loans are not offered in the same way in Russia as they are in Europe: they are usually short term, over a period of twelve or twenty-four months, with interest rates that can reach 25% or more. For many small businesses they are not an option).
Russia is the eleventh country to which Point S has been exported. In central Europe the network is already established in Poland, Hungary and the Czech Republic.

- The OuAZ factory (SeverstalAvto Group) in Oulianovsk on the Volga has begun the assembly of Isuzu NQR 71 vans. Sales forecasts are banking on 10,000 units being sold over the next three years, for an investment of nearly 1.25 million euros. The first 500 vehicles should be assembled in 2006.

- The GAZ Group has acquired the production equipment and licence for the Chrysler Sebring and Dodge Stratus from Daimler Chrysler. Production of these models at the manufacturer’s own factory should stop at the end of 2006. Production in Russia under a brand yet to be determined will be carried out at the GAZ factory in Nijni Novgorod on the Volga. Until recently the factory produced locally designed cars. GAZ is planning to produce up to 65,000 cars per year, with an investment of 125 million euros.

- SeverstalAvto has acquired the production license for Fiat Ducato utility vehicles. Production should begin at the end of 2007 in the Elabouga factory in the Alabouga special economic zone in Tatarstan. Forecasts are for 75,000 units per year.

- The counterfeit parts market for Russian brands of cars is worth 1.75 billion euros, which is about 30% of the total market, according to the National Association of Car Component Producers (NAPAK). Made by small companies in uncertain conditions, counterfeit parts are supplied to the secondary market.

- Ford Focuses assembled in Vsevolozhsk will be fitted with alloy wheels made by KiK in Krasnoïarsk in Siberia.

- The Michelin factory in Davidovo in the Moscow region has been supplying summer tyres for some of the Ford Focuses assembled in Russia since September 2006. Built with an investment of 60 million euros and brought into service in 2004, the factory produces Energy summer tyres and Alpin winter tyres. 925,000 tyres were produced in 2005. There is capacity to increase production to 2.1 millions tyres per year.

- Bridgestone is looking for a ten hectare site in the St Petersburg region for its future factory.

- PSA is working on a factory project in Russia, according to sources close to the Russian government. Negotiations are in progress for an investment package that includes tax breaks for the company. The factory, with a capacity for 60,000 cars, could be located in the Nijni region and would be brought into service in 2009.

- The German company WOCO is planning to supply AvtoVAZ with rubber parts. An agreement is being finalized. WOCO will establish a factory in Togliatti on the Volga, the same town in which AvtoVAZ has a factory, by 2007.

- The local company VAZInterService and the South Korean company Halla are going to set up a site for the production of air-conditioning systems in Togliatti. The systems will be used to equip Kia Spectras assembled in the IzhAvto factory in Izhevsk, in the Ural region. VAZInterService and IzhAvto belong to the same holding company SOK, owned by the business man Iouri Kachmazov. Mr. Kachmazov’s fortune was estimated at 210 million euros in 2005 by Finans magazine.

- Bosch is planning to build two factories in Russia. The German company has just signed a technical cooperation agreement with AvtoVAZ which lasts until 2010. Bosch will participate in the design of new models on the basis of a unified platform known as “platform B/C” to bring them into conformity with future regulations on toxic emissions and safety, and in the adaptation of ABS and new 1.4 and 1.6 liters engines. Bosch plans to build the factories in the Moscow and St Petersburg regions. Dates have not yet been announced. Bosch currently owns 97% of the capital of the Russian company Bosch-Saratov. Located in Saratov on the Volga, it produces spark plugs, volumetric sensors, petrol pumps, cables, etc.

- Severgal, the joint Arcelor (25%) and Severstal (75%) venture is testing its galvanized steel production line in Tcherepovets in north Russia. The factory should produce 17,000 tons in 2006 and has production capacity for 400,000 tons per year. The company is planning to supply AvtoVAZ and AvtoFramos, Renault’s Russian subsidiary.

- The Italian company Magnetto has been selected by Volkswagen to supply body parts for its planned production in Russia. The supplier’s future site may be located in the Moscow or Nijni Novgorod region. A joint venture with the GAZ factory in Nijni is a possible option. Construction of Volkswagen’s factory in Kalouga started in 2006.

- The German company Automotive Lighting is planning to build a second factory in Russia, in the Riazan region. Work is planned to start in 2008. The future site will be able to produce rear lights and fog lights for Renault Logans assembled in Moscow. Automotive Lighting is also targeting Toyota and Volkswagen’s future factories. The supplier currently counts AvtoVAZ, GM-AvtoVAZ, GAZ and OuAZ among its customers, and has nearly 15% of the car lights market in Russia.

- The Finnish company Nokian Tyres is planning to produce 1.5 million tyres in its factory in Vsevolozhsk in 2006. The site’s capacity could increase to 8 million tyres by 2018. Nokian invested close to another 50 million euros in its activities in Russia in 2006, with the objective of developing the industrial facility that was unveiled in 2005, and of enlarging its distribution network under the Vianor brand.

- Siemens VDO plans to open new production sites in Togliatti on the Volga and Kalouga in the Moscow region. The Togliatti site will produce electrical components for the AvtoVAZ (Lada) and GM-AvtoVAZ (Niva) factories located in the same town. Siemens VDO’s site in Chistopol in the Tatarstan region currently produces dashboards for AvtoVAZ and KamAZ (trucks).

- The Korean company Kia Motors has signed an agreement with the holding company SOK for the assembly of Kia Rios in the IzhAvto factory in Izhevsk, in the Ural region. The factory already produces Kia Spectras under licence; the manufacture of these cars in South Korea has been stopped.

- TZSK, a manufacturer of steel wheels in Togliatti near the AvtoVAZ site, has purchased a license from Hayes Lemmerz International to use its technology in the company’s production.

- A joint venture between the American Cummins Engine Company and KamAZ, the Russian manufacturer of heavy trucks, has started production of engines at KamAZ’s site in Naberezhnie Chelny. The engines range in power between 120 hp and 275 hp and meet Euro-2 pollution standards. The factory should produce 12,000 engines in 2008 and 24,000 in 2010. Cummins Engine has worked in partnership with KamAZ on various sites since 1991.

- AvtoVAZ is planning to start building a new engine factory with a production capacity of 660,000 units per year. Work should start on the AvtoVAZ site in Togliatti in 2007. 420 million euros may be invested in the project.

- Amtel-Vredestein has bought the “Moscow Tyres MShZ-M” tyre factory, the former joint venture of the Russian company MShZ (owned by the town council of Moscow) and the German company Continental. The factory has a production capacity of 2.2 million tyres per year. The Russian manufacturer took on MShZ’s debts of some 60 million euros.

- IzhAvto may be put up for sale. Its owner, the business man Iouri Kachmazov’s holding company SOK, wants to offer it to Kia or Hyundai. The argument is that the buyer would save the time required to build a similar sized factory. SOK has already tried to sell IzhAvto to AvtoVAZ without success. IzhAvto produced 53,000 cars in 2005 and sales have been falling 10% to 15% per year. The company is counting on sales of the Kia Spectra to improve its fortunes; production was launched in 2005 under an industrial assembly contract. Production is planned at a rate of 40,000 cars per year.

- The Ukrainian holding company Bogdan is reported to be negotiating the construction of an assembly factory in the Nijni Novgorod region. It would appear that Bogdan has its eye on the same site in which PSA has already expressed an interest. Bogdan is planning to assemble up to 50,000 Chevrolets per year. The holding company has car factories in Loutsk and Tcherkassy in the Ukraine. It assembles various Lada models. Bogdan also imports Kia, Hyundai and Isuzu.

- The German company Linner is planning to build a filter factory with a view to supplying factories assembling foreign brands. The filters market is currently dominated by Eastern European and Asian brands.

- AvtoVAZ intends to equip its Lada Kalinas with automatic gear boxes made by the local company Kate in Kaliningrad on the Baltic Sea. The factory will be able to produce up to 260,000 gear boxes per year. Some of the components will be provided by the Taiwanese company Tsang Yow. The project will be financed by the Vneshtorgbank. Maxim Nagaïtzev, the former managing director of Kate has joined AvtoVAZ’s board of directors and is even deputizing as the manufacturer’s managing director.

- Nissan is planning to assemble three models in its factory near St Petersburg by 2009. Production will start with 20,000 cars per year and build up to 50,000. The company also intends to organize the production of parts. Nissan plans to invest 8.5 million euros in the construction of a terminal in the nearby maritime port to facilitate its transport operations.

- Production at the Volkswagen’s factory in Kalouga could reach 110,000 per year by 2009. The manufacturer will begin by assembling Skodas, which are more suitable for the Russian market. The company intends to invest 370 million euros in the project.

- The Automobile Manufacturers Committee has sounded the alarm: the poor quality petrol found at some garages can damage cars. The Committee is part of the Association of European Businesses in the Russian Federation. It assembles a lobbying structure of thirty-three western car manufacturers with a presence in Russia and which are already producing cars in Russia or importing vehicles.
http://www.aebrus.ru

- 4x4s currently represent 12% of sales which should increase to 14.2% by 2010 according to the investment company Financial Bridge.

The MIMS – Interavto show in Moscow has become an unmissable event for international car manufacturers. Held at the end of August in 2006, the show hosts both car manufacturers and suppliers to the car industry: forty-five manufacturers squeeze in to present their most luxurious models. These include a fair number of Chinese manufacturers, who take considerable interest in the expanding Russian market.
Nearly 1000 suppliers took part in last year’s show. There were a lot of Turkish and Chinese companies. With the exception of tyre manufacturers, European suppliers were thin on the ground. RCA France, which specializes in transmissions, universal joints and constant velocity joints, exhibited for the first time at the show, as a rehearsal for the Automechanika show in Frankfurt. “We made some contacts in Moscow, now we will have to wait and see if things go any further. I think that the results were satisfactory for a first visit”, declares Hassane Ouaked, RCA’s export manager.
The MIMS – Interavto takes place at the Crocus Expo exhibition centre on the north-west edge of Moscow. Crocus Expo hosts international exhibitions in its two pavilions covering 87,000 m² and a large open-air area. A third pavilion measuring 120,000 m² is under construction. The centre is modern and well laid out. This is no doubt the reason for the high prices: around 200 euros per square meter for stands at the MIMS (car manufacturers) and Interavto (car industry suppliers) show in 2007. The Crocus Expo centre’s major inconvenience is that it is served by congested roads: it takes between an hour and a half and two hours to reach by car from the centre of town. However, a train link is being built that should solve this problem.
http://www.motorshows-ite.com/

- Interavtomechanika Show, from 14th to 17th February 2007, in the show center Crocus Expo. This show has an industrial orientation. It is centered first on components, manufacturing technologies and equipment for the car industry.
http://eng.crocusexpo.ru/

- The Russian Automotive Industry, Adam Smith Conferences’ 10th Annual Forum. 13th – 15th March 2007, Marriott Grand Hotel, Moscow. The Conference will provide an all-rounded overview of the current state of the rapidly developing automotive industry in Russia.
www.adamsmithconferences.com

- The car components Show in Samara, from 18th to 20th April 2007. Organized with AvtoVAZ.
http://www.avtoindustry.ru/en/

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