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factory is pinning it hopes on the French brand and its managers to help
is get out of its current mess.
This 25% stake in Avtovaz, has
made Renault the western automotive company with the biggest presence in
Russia. The agreement signed at the end of February 2008 requires that
Renault invests nearly a billion Euros in the operation.
The stakes are massive. Avtovaz is Russia's leading car manufacturer
with 117,000 employees at Togliatti who manage to produce 720,000 cars
per year. Its income was close to 5.8 billion Euros in 2006 with a net
result of 97 million Euros (at the exchange rate of the day). The
company's market share has been falling regularly: 38% in 2005, 32% in
2006. It should fall below 25% in 2008 and analysts expect it to
stabilise at about 20% in 2010. There are several reasons for this
decline. The company has not renewed its products and most of the models
have been produced for more than 30 years, virtually without change.
Foreign companies have arrived on the Russian market with locally
assembled models thereby avoiding Customs duties which has been an
unpleasant surprise: the foreign cars are offered at the same price and,
sometimes, even for less than the Avtovaz vehicles.
The production was in urgent need of rejuvenation. Avtovaz had been
negotiating for over two years with Renault, but also with GM and Fiat.
The Canadian, Magna was also in the race but could not win because it
did not have any models to offer GM said it was interested but was
prudent: the American manufacturer was not completely satisfied with its
previous partnership with Avtovaz based on its four-wheel drive, the
Niva. There remained Fiat, the Russian's historical partner who had
designed Avtovaz's first range based on the Fiat-124 in 1969 and who had
contributed to the construction and outfitting of the Avtovaz factory at
Togliatti. Renault was chosen ahead of the Italians probably for
Cars and managers
Renault will provide a new platform to the Togliatti factory and a new
series of engines. These will progressively replace the outmoded Lada
lines but keep the same logo. The first vehicles from the partnership
should be on sale by the end of 2009 according to Renault.
Carlos Ghosn, Renault chairman, will have a seat on the Avtovaz board as
will Patrick Pélata and Thierry Moulonguet, both deputy chief
executives. The nine other board places will be held by representatives
of the Russian shareholders of which the main one is Rossoboronoexport,
a nationalised company responsible for arms exports. Rossoboronoexport
is expected to provide the funds required for the company's
Four French managers will join the Avtovaz senior management team: Yann
Vincent as chief executive officer, Hugues Desmarchelier as vice
president chief executive for 'Plan, product, programme', Christian
Muller as vice president Purchasing and an as yet unselected person as
vice prudent finance.
The French management has a head start in this competition. Renault has
been operating a factory at Moscow since 2002 under the Avtoframos name
and has been producing the Logan there since 2005 which has been a great
success in Russia. This has undoubtedly provided Renault management with
considerable market experience which provided them with an advantage in
At the same time, the Avtoframos factory at Moscow is conducting a
programme to double its capacity by constructing a new production line
on adjoining land. The aim is to increase Logan production from the
current 60,000 to 160,000 by 2009. Nissan, Renault's partner, is
building a factory near St Petersburg to produce 50,000 cars per year
from 2009. One of the issues for Renaults expansion into Russia is
finding the right balances and links between these different projects.
In addition to launching new models, the Avtovaz will have to deal with
several structural problems. The current production rate at the
Togliatti factory is just over six vehicles per employee per year. This
compares to 35 to 50 vehicles per employee per year in international
manufacturer's factories established in Russia. The difference is large
and the social consequences as serious as they are inevitable.
Avtovaz is the life blood for several component suppliers at Togliatti
and in the neighbouring area of the Samara region, most of which are
part of the SOK group. However, the quality of their products is
questionable with defect rates that often exceed 1,000 per million. Some
have already decided to enter into partnership with international
component manufacturers such as Delphi (see Auto Franco-Russe No.3).
There will be a strong demand for new partnerships in all the automotive
equipment sectors in the region during the coming years.
Having been overtaken by Renault
in the big partnership with Avtovaz, GM could be going to make a deal
with GAZ at Nijni Novgorod, according to salon Rick Wagoner, GM chief
executive. The American manufacturer is already building a factory in
the St Petersburg region with a forecast capacity of 70,000 cars per
year but apparently that is not enough to satisfy the appetite for its
brands. It should be mentioned that the current partnership between GM
and Avtovaz for the assembly of their joint model, the Chevrolet Niva
and the Chevrolet Viva is not a great success. The GM-Avtovaz management
has not managed to adapt to the authoritarian methods of the new Avtovaz
management who come from the Rossoboronexport federal agency. The GAZ
group, with its mainly western management team, must appear to be a much
more predictable partner.
The Toyota factory near St
Petersburg was opened at the end of December 2007. Construction took
thirty months. The factory will assemble the Camry: the first cars will
be finished at the end of February / early March 2008 and should reach
20,000 units in 2008. Toyota plans to produce 50,000 in 2009 on this
same line. The manufacturer plans to install a new production line in
the medium term to assemble a low-cost model aimed at emerging
countries. The site's production capacity could reach 200,000 units per
year. The current factory is only using 50 Ha of the 225 Ha that has
been reserved for it. Toyota also plans to have some of its suppliers
present on the site.
Following months of negotiation,
Peugeot-Citroën has decided to locate its future factory on the Rosva
site at Kaluga. The factory should produce up to 100,000 cars in 2010
according to the initial plans. Recent statements from Christian Streiff,
Chairman of the PSA board, suggest that this objective may be increased:
he sees the first stage producing 150,000 units per year with the final
capacity being 300,000. The Kaluga region is already home to the
Volkswagen factory and the planned Volvo Trucks plant.
OF AUTOMOTIVE INDUSTRIES IN THE NIJNI REGION
Nijni Novgorod, the birthplace of
the local automotive industry, is still at the industry's core: 59% of
local truck production and 69% of bus production are concentrated there.
The GAZ group is one of the rare survivors of the local industry and has
several factories producing trucks, the PAZ factory that produces buses
and two armoured and tracked vehicle assembly plants. Next door,
Severstalavto runs the ZMZ engine plant. This concentration has resulted
in lots of small manufacturers who are specialised in adapting vehicles
for special sectors: ambulances, mobile cranes, etc. According to the
local authority, Nijni and the surrounding towns are home to at least
fifteen parts manufacturers including the joint venture between French
company Faurecia and the Spanish company Ficosa. The region is trying to
attract others to strengthen its automotive centre. Amongst other
things, it is offering a reduction of 1 - 4%, depending on the
conditions, on the regional part of company taxes and exemption from
other taxes including property taxes.
Iwao Ohashi, Moscow representative
of the Japan External Trade Organization, expressed his feelings during
the Auto Russia 2007 conference on the potential relocation of Japanese
sub-contractors to Russia following the footsteps of the OEMs.
After emphasising that Japanese exports to Russia had grown by a factor
of 18 between 2000 and 2007, from 571 million dollars to over 10 billion
dollars, he stated that the automotive sector represented 8.2 billion
dollars out of total exports worth 10.5 billion in 2007. An increase by
a factor of 49 from 2000!
In line with the general trends, the Japanese OEMs have been committing,
one after the other, to local production projects. In the Saint
Petersburg region alone, Toyota will produce 20,000 vehicles in 2008
(eventually 50,000); Nissan also has a target of 50,000 vehicles from
2009 and Suzuki forecasts 30,000 units from 2010. Lastly, Isuzu plans to
manufacture 30,000 trucks eventually through its partnership with
Severstalavto at Alabuga.
The big question is whether or not the component manufacturers will
follow them Under current conditions, Mr. Ohashi suggests that the
movement will be smaller than in central Europe; it will be sufficient
to comply with the Decree 166 local content requirements but not more.
To stimulate greater risk taking by suppliers, Mr. Ohashi thinks that
the OEMs must start mass production, producing 100,000 to 300,000 units
He indicated that amongst the points that needed to be improved to make
it easier for suppliers to establish themselves locally was the lack of
industrial estates that met investors' requirements, administrative
difficulties and the need for a 'one stop' service for foreign
Maxim Sokolov, Chairman of the
investments and strategic projects committee in the St. Petersburg
government commented on the attractiveness of the region for general
investments and especially for the automotive sector during the Auto
Russia 2007 conference.
The total amount of foreign investment exploded in 2006 with 5.2 billion
dollars compared to only 1.4 billion in 2005. M. Sokolov estimates that
there have been 1.2 billion invested in the automotive sector since
2003: General Electric, Toyota, PPG, Nissan, Magna, etc. This total does
not include the significant investment made by Ford and Nokian at
Vsevolojsk, about twenty kilometres from Saint Petersburg.
M. Sokolov counts on the regions strengths to attract new projects and
enhance St Petersburg as one of the Russian 'automobile clusters':
improving sea and road transport infrastructures, administrative support
and tax facilities.
In tax terms, the tax rate for company profits has been reduced from 24%
to 20% for five years for any company that invests more than 3 billion
roubles (83 million Euros) in production assets (compared to a reduction
of 2 to 3% during the previous years). Companies are completely exempt
from Property Tax for five years for investments in excess of 3 billion
Russian SMEs are suffering from a
growing pressure from the bureaucracy according to the local small
business leaders’ organisation 'Opora Rossii'. The average cost of
'dealing with administrative barriers', as Opora politely refers to it,
will be more than 10% of turnover in 2007 and is increasing by about 1
point per year. This payment is taken during multiple inspections of SME
exercised by different authorities.. The tax authorities, health
inspectors, fire brigade, etc.; each company suffers an average of five
to seven inspections per year. At St Petersburg, 55% of businessmen
questioned by Opora commented on the bureaucrats' growing appetites. The
payment rate due to corruption is 10.7% of turnover. Opora claims that
this rate is even higher at Moscow.
The Russian manufacturing
environment currently has twin constraints. On one side, there is a
large increase in service, energy and raw material prices. Transport
costs have increased by 7.5%, natural gas by 10%, electricity by 7.5%
and water by 8% in the same year against a background of constant
inflation at 9% according to official figures. Salaries have increased
by nearly 15% on average. On the other side, the State is increasing its
announcements of environmental protection measures. Even of they are not
always complied with internally, these restrictions are applied to
western companies with great vigour. This dynamic must be taken into
account when calculating the profitability of a production site.
Producing locally could be a
disadvantage for Michelin? This surprising theory was proposed by one
manager of Russian auto centers: 'Michelin sells locally produced tyres
at the same price as those produced in France. However, Russian
consumers are used to expecting quality defects in all locally produced
products. As the site of production is clearly marked on the tyres,
drivers want the 'made in France' tyres sold at the same price. A
phenomenon that we can call economic non-patriotism...
The strike at the Ford factory at
Vsevolozhsk lasted 25 days in November and December 2007. Following a
settlement negotiated between management and the independent union
MPRA-Edinstvo, a company agreement was signed in January 2008. It
provides for salary increases of 16% - 21% depending on qualification
levels. The entry level salary is increased to 750 dollars and the
average salary will be slightly more than 1,000 dollars. The social part
of the agreement now includes long service bonuses in the company and a
New car sales reached 2,644,300
units in 2007, an increase of 13.7% compared to 2006, according to the
Russian automotive constructors association (OAR). This includes almost
715,000 units from local manufacturers (-8.5% compared to 2006), about
440,000 locally assembled vehicles from western manufacturers (+63.6%)
and 1.49 million imported vehicles (+16.8%). OAR has used the figures
from local manufacturers, the AEB association which represents western
'assemblers' and the Customs.
CIRCULATING VEHICLES AT ST
PETERSBURG SHOW THEIR AGE
There were about 1.5 million
vehicles circulating at St Petersburg in mid 2007 and the annual
increase is 10 - 11% according to a survey by the Autostat agency. The
majority are cars that are over ten years old: 51%. The local brand,
Lada, is still the most popular with almost 473,000 cars. The leader
amongst the foreign brands is Volkswagen with 69,000 units, mainly
Passats and Golfs, followed by Ford with 62,500 and Opel with 45,000.
Ford is also the leader for new registration: almost 10,000 in the first
six months of 2007. Chevrolet and Nissan are next with 7,048 and 6,642
units respectively during the first six months of the year. Renault sold
over 5,000 cars.
The circulating truck fleet increased by half a
million units between 200 and 2006, from 4.4 to 4.93 million, according
to the Russian manufacturer's association (OAR). The members of this
lobbying body are only local manufacturers. According to OAR, the fleet
has mainly been increased in the <3.5 tonnes category: from 1.03 million
in 200 to 1.64 million in 2006. The 3.5 - 9 tonnes fleet has remained
fairly stable changing from 1.74 to 1.79 million units. The 9 - 16
tonnes fleet has fallen from 1.03 to 0.69 million units over the same
period. The >6 tonnes fleet is estimated to be 0.8 million in 2006, a
Truck sales were 354,000 units in 2006, compared to 229,000 in 2000. The
truck market consisted of 14.1% imported new vehicle imports and 31.8%
imported second-hand vehicles in 2006. The remainder was supplied by
local production including 2.5% of locally assembled western brands.
The bus fleet reached 824,000 units in 2006 compared to 640,000 units
six years earlier. The increase is due to high demand for small buses
that has increased from 248,000 to 420,000 units. 85,000 unite were sold
in 2006 and were mainly manufactured locally. Imports of new vehicles
accounted for 7.6% and second-hand imports were 9%.
This article should have been a
report on the debates that occurred on December 14th at St Petersburg
during the Auto Russia 2007 conference organised by World Business
Unfortunately we were only able to take part in this conference from the
entrance hall via a video screen transmitting the image from a single
badly aligned camera with a terrible sound quality that made it
impossible to understand what the speakers were saying. Obviously,
questions from the floor were completely inaudible.
We paid for flights to St. Petersburg and two nights in the superb but
(as you would expect) very expensive Astoria hotel, the conference
registration fee (no giveaway) in order to have almost nothing to say to
you given the aforementioned circumstances.
This article is a tribute to the incredible incompetence of the
organiser who did not hesitate to overbook a service without advising
its clients, who made people travel from one end of Europe to the other
at high prices then made promises that it did not seem to consider to be
Paying 5,000 € for six Power Point files by mail without comments is,
you will agree, a bit rich.
Be careful if you are thinking of going to Auto Russia 2008: will the
organisers even bother renting a room this time?
Nizhnekamskshina in Tatarstan is one of the
leading tyre companies and is increasing its partnerships with
international brands by launching a new range of truck and car tyres.
Serguei Zhadan, Nizhnekamskshina's man in Moscow, explains:
Auto Franco-Russia: You are one of the main heavy
goods vehicle tyre manufacturers in Russia. What is your production
Serguei Zhadan: It consists of two factories on the same site 200
meters apart. The SGSh (Zavod Gruzovikh Shin) factory produces truck
tyres. It was built to supply the KAMAZ truck factory located at fifty
kilometers from Nizhnekamsk, nowadays it supplies 90% of the KAMAZ needs
in OEM. And our tyres are sold everywhere that there are KAMAZ trucks:
in Russia and the CIE and also in Iran, Iraq, Africa, the Balkans,
The ZMSh (Zavod Massovikh Shin) factory produces car tyres. We provide
60% of AVTOVAZ's needs and a part of those of OUAZ. We make sporadic
supplies to the Izhavto factory at Samara, Daewoo's plant in Uzbekistan
and a few other OEM.
- Do you feel the competition from international brands on the heavy
goods vehicle market?
- No, because we are developing in parallel worlds. We and our
competitor, Sibur Russian Tyres, manufacture 20 inch tyres that are
habitually used by KAMAZ trucks. Foreign brands make all-steel 22.5 inch
tyres. These tyres are used in different, less challenging operational
conditions. They provide fuel savings and higher speeds on high quality
roads. A KAMAZ can be fitted with 22.5 inch tyres but that requires that
the wheels are replaced which makes it an expensive procedure.
Nevertheless, some companies do it. I think that as new roads are built,
the demand for 22.5 inch tyres will grow progressively.
- Do you think you will also manufacture all-steel tyres for trucks?
- We have already tried by the trials were inconclusive. However, it's
still a project. Nizhnekamskshina has now built a workshop in
partnership with Continental to house its new project for all-steel bus
and truck tyres. The production line should start producing in 2009 with
a forecast capacity of 1.2 million tyres per year.
- What plans do you have for car tyres?
- We are busy developing a range with the new Kama Euro line developed
with Pirelli for segment B. The line produced 1 million tyres in 2006
and should reach a rate of 1.8 million by the end of 2007 with a nominal
capacity of 2 million.
Our parent company, Tatneft has invested nearly 40 million Euros in the
Kama Euro project and various assistance projects, especially those
related to improving product quality and in a new rubber mix preparation
line that entered service in autumn 2007. And we are currently working
to obtain ISO 14000 and ISO 16949 certification.
- What are your distribution routes?
- We have an integrated structure called 'Torgovi Dom Kama' that has
different regional entities: south, centre, etc. The TD Kama-Centre is
located at Moscow and covers the capital region. Its logistics is
provided by transport service providers. The major accounts take care of
their logistics themselves.
What is Nizhnekamskshina?
Nizhnekamskshina is located at
Nizhnekamsk in Tatarstan and belongs to local petrol group Tatneft,
which is owned by the Tatarstan government. The company produced 12.2
million tyres in 2006, of which 4.6 million were truck tyres, 7.3
million were for private cars and 300,000 for agricultural vehicles.
About 23% of the output is supplied to OEM. 2006 production was 7%
higher than 2005.
ARE LOOKING FOR PARTNERS RATHER THAN SUPPLIERS!"
republic is part of Russia and home to several automotive factories. It
is trying to attract new investment especially for its special economic
zone. Iskander Ioussoupov, Minister representing Tatarstan and manager
of a consultancy that specialises in assisting western companies,
Franco-Russe: Is the presence of factories in Tatarstan an old
tradition? Iskander Ioussoupov: The Kamaz truck factory is our biggest
automotive company, a legacy from the Soviet era. The town near the
factory had up to 50,000 inhabitants in the good times. However, with
the end of the USSR, the Kamaz company had problems and was victim to
irresponsible management, became crippled by debts and finally suffered
a fire. The Tatarstan government in combination with the Russian federal
government agreed to buy the factory and refloat it.
The factory is now once again in business and selling to the local
markets of former USSR countries of Uzbekistan, Kazakhstan, Ukraine… and
also Egypt, Pakistan, Cuba and negotiating with Iran.
International suppliers have no problems in coming to see us. e.g. we
have had discussions with Renault Véhicules Industriels for cabs –
without success, unfortunately. Kamaz is also negotiating with the
Italian Landini for tractor production. The German Menzolit intends to
manufacture with us.
But there is more than just Kamaz in Tatarstan. The Severstalavto
factory, next to Kamaz, and the other Severstalavto site in the Alabouga
special economic zone, thirty kilometres away, assemble different models
for Fiat amongst others. This special economic zone should receive other
automotive sector companies. In 2010, Tatarstan will be able to produce
200,000 vehicles per year.
- What are the advantages offered by the Alabouga special economic
- We offer very favourable conditions for investors, provided they
satisfy a few commitments. The project must have a budget of at least
ten million dollars with no less than one million dollars in the first
year. The support from our side is double. The Russian state invests in
infrastructures. Tatarstan offers a tax bonus with reductions for ten
years and facilities with the regime for importing goods.
- The Chinese manufacturer Great Wall wanted to establish its
automotive factory in the Alabouga special economic zone. It even agreed
to allow the Tatarstan government to become part of the project – it
seems that this is a condition imposed on most investors. But its
project never got going, why?
- The Great Wall project was not sufficiently balanced. They wanted to
receive lots of things without offering anything in return.
- In which sectors in particular are you looking for western
components suppliers? - We are not looking for suppliers but rather for
partners! Foreign companies that establish themselves here are not
obliged to have a joint venture with us. However, when western companies
set up on their own, it often ends badly.
Our strategy is to promote a local attachment. And avoid the someone
sets up, imports everything from the outside and then re-exports the
production. On the other hand, the supplier could cover the whole
We would prefer to develop a pool of European manufacturers of
electronics, plastics, cabling, etc. who are focused on the automotive
Who is Iskander Ioussoupov ?
Plenipotentiary Minister -
representing Tatarstan in France, Mr. Ioussoupov combines this function
with his business activities. He is chief executive of Sofexpo SARL, a
company specialised in organising trade fairs with offices in Paris and
Moscow. His company provides assistance services for companies
interested in the Russian market.
Where is Tatarstan ?
This republic with a mainly Muslim
population of 3.7 million is on the banks of the Volga and is part of
Russia. Oil and natural gas reserves provide it with a degree of
economic stability. The by-products from processing these natural
resources profit the chemical industry, especially at Nizhnekamskshina,
on of Russia's main tyre manufacturers.
COST OF ACQUIRING A PARTNER CAN BE VERY HIGH"
A French company
probably needs a local partner in order to ensure its development in the
Russian regions. Frédéric Bélot, lawyer at BM & Associés, is a
specialist in the Russian market and summarises the recurring problems
with finding a partner and creating a joint venture company.
The Fil Franco-Russe: Is it
essential to have a local partner for the Russian market? Frédéric Bélot: A company has a real need of a Russian partner it
is to ensure its development, especially in the regions. Otherwise it
will not have the same access to information and will find itself faced
with lots of opacity. But the cost of acquiring a partner can be very
- What are the criteria that should be used to select a partner?
- You should look for a businessman with skills in your sector rather
than someone who has regional skills. The contact list is no longer the
first requirement as it was a few years ago. Nowadays, if you select
someone who does not share your view of the business, this could result
in a disagreement. Ask French, American or other lawyers and commercial
bankers with a local presence to help you make your choice.
- And if you are a SME with a small budget?
- Use government circuits such as: Ubifrance, the Mission Economique
Française in Russia, and sometimes the Mission Economique Russe in
Paris. Or associations such as Dialogue franco-russe, they have good
contacts. You should also attend all the trade fairs and forums on the
country; use every occasion to meet businesses that are already
established. They can advise you about a future partner. Word of mouth
works quite well.
- What are the Russian partner's specific needs?
- The Russian partner will need finance and technology transfer. But on
its side, it will have no idea of the needs of its French partner. There
is a lack of capitalism in Russia and the win-win approach does not
exist. We think the Russians are very similar to us but in reality they
are very different.
- How should responsibilities be split in a joint venture?
- When writing the articles of association for the joint venture, the
two most difficult things to agree are who will be the chief executive
and who will have 51% of the shares. The 50-50 split is not a good
solution because it can result in stalemates that last for long periods.
And you have to include termination clauses in the contract.
- Can you obtain local finance for a joint venture?
- Russian banks are not service providers like others, its activity is
very strictly controlled by complicated and restrictive legislation.
They are not sources of finance. The bank will constantly verify,
inspect and sometimes block your initiatives. You can not do what you
want with your money. Consequently, western companies that establish
local branches will need a source of finance from outside Russia.
Unfortunately, Russia foes not have a good reputation. This means the
finance will be expensive in terms both of interest rates and the
- Should managers be French?
- The fiscal environment in Russia is very heavy. Local companies are
used to this and this gives them an advantage. Neither a French company
nor their French employees. It is very important to recruit local
managers who are experienced in this environment and who speak English.
It is not recommended to use expatriates for senior positions. However,
they are essential for technical manager roles, for technology
- How do you recruit in Russia?
- Local employees have a short term view when recruited. Their primary
interest is the salary. People change companies for fifty Euros per
month more. This creates great instability. Employees have the
impression that they are getting lots of employment offers all the time,
some of which are not at all genuine. They are incapable of long term
thought, projecting themselves into the future. The concept of a career
has not yet developed. It is replaced by the concept of salary.
If you have a local partner, it's responsible for solving human resource
- And if it is a fully owned subsidiary?
- Then you need to find a local chief executive. This isn't easy because
you need to find someone who is going to invest themselves in the
company, someone you can trust, who will not take your information and
sell it to a competitor and who will not run off with the family jewels.
The key word is control. You have to check everything. Have the goods
been delivered? OK but under whose instructions? Have payments been made
- who ordered it?
- Have we covered all the problems faced by companies in Russia?
- No, far from that... we would also have to talk about property, the
relationship with the owner is not secure. If he sees that your business
is doing well and you are making money, he will increase your rent. In
the retail sector, we are currently undoing some franchises because the
rents have increased and the franchisers are unable to cover their
costs. There is also the problem of finding clients. Clients are not
loyal. The cost of stabilising a clientele is very high and requires a
large publicity investment.
Who is Frédéric Bélot ?
A lawyer and Russian market
specialist who helps French companies in Russia and also represents the
Guide of Russian Lawyers in France, especially for human rights issues.
His firm of BM & Associés have an office with a staff of four in Moscow
to provide assistance to their clients. They work in the luxury, wine,
medical electronics and new technology sectors, amongst others. They
also assist Russian companies that want to establish themselves in
Mazda sales in
Russia were 5,300 cars in November 2007 which is almost twice the figure
for the previous year. It’s the company's biggest result in Europe.
Alost 120,000 car thefts were reported in 2007 according to the interior
ministry statistics, and almost 48,000 were recovered. Toyota
Land Cruiser and Volkswagen Passat are the thief's favourites.
Amongst other vehicles popular with thieves we find different BMW
models and the Nissan Primera, Toyota Camry and some local
According to Yoji Murosaka, Director of Suzuki in Russia,
the company's sales had grown by 75% at the end of October 2007 compared
to 2006 with almost 23,000 vehicles sold, mainly the SUV Grand Vitara
(11,626) and Liana (5,113). The 2008 objective is to sell 50,000
vehicles. Suzuki has started building a manufacturing plant at
Shushari which will produce 30,000 units per year from 2010 (Grand
Vitara and SX4),with spare land that can be used to increase the
capacity if necessary.
Ford is still in trouble with the tax authorities. The Director
of the Federal Custom's Service stated in early 2008 that the
American manufacturer had not invested enough to arrange in the local
production of its components. It had not met its obligations under the
relocation agreement according to the administration which emphasised
that the company must make 40% of it investments locally. The Customs
authority has already tried to prosecute Ford in 2006. At that
time they claimed almost 11 million Euros of tax in vain. Ford
had managed to align its contract with the Russian government with the
more supple ones signed with other manufacturers. However, high quality
components suppliers are still absent in Russia which is why it is
difficult to 'relocate' component production.
The tyre market was wroth 3 billion dollars in 2006. It consists
of 2.5 billion of local product, including 0.65 billion exported, and
1.12 billion of imported products. This market should continue to grow
at 15% for the volume and 21% in value by 2010, according to local
The Lear group is ready to celebrate 10 years or manufacturing in
Russia. It opened its first factory in 1998 at Nijny Novgorod. The site
now employs 260 people in two shifts and produces seat and head rest
assemblies (capacity of 360 units per day) that are used for the local
Gazelle, Volga 3102, Chevrolet Viva and Niva. Lear opened a
second factory at Volokolamsk (near Moscow) in 2005 where 400 people are
employed to produce wiring loops with output at 300 units per day.
Local component companies have an average yield of 36,500 dollars per
employee per year according to the Strategika agency. This is
about six times less than western component suppliers where it's
estimated to be 204,000 dollars. The average defect rate is about 1,000
ppm compared to a maximum of 70 ppm to meet the ISO quality criteria.
- The Russian Automotive
Industry March 11th - 13th 2008 at Moscow
An international conference organised by the Adam Smith Institute.
Interventions are planned from the main players from the local and
international industry. You can meat the cream of the leaders in Russian
automobile industry and their purchasing directors.