France-Russia Automotive
N° 9
June 2010
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France-Russia Automotive (Auto Franco-Russe) is an economic newsletter focusing on the development of the Western automotive groups’ business in Russia. France-Russia Automotive is distributed both on paper and electronically. To receive the next issues for a free trial you only need to subscribe on our website: www.autofrancorusse.fr. France-Russia Automotive is published by Agence du Fil SARL Company, whose publications are devoted to the Franco-Russian trade.
EVENT
CASH FOR BANGERS BENEFITS LOCAL MANUFACTURERS
The programme for scrapping cars has re-launched production of Avtovaz's oldest models.
The national 'cash for bangers' programme came into
effect in March 2010 and re-launched sales. This programme meant that a
driver who scrapped a vehicle that was over 10 years old received a
certificate worth 1,250 dollars that could be used against the purchase
of a new car. The list of cars that could be purchased with this
certificate included 79 cars from local companies and foreign brands
that were already being assembled in Russia or for which local assembly
was planned, such as for the Peugeot 308 and Citroën C4.
Almost 160,000 car scrapping certificates were issued between January
and June 2010. The demand increased progressively over this period. This
dynamic is explained by the fact that the cars were buried under snow
and their owners could not transport them until the spring thaw. Various
Avtovaz models represent over 70% of the cars already scrapped.
Over 60,000 certificates have already been used to make a purchase. The
western brands have not benefitted very much with the minor exceptions
of the Renault Logan and Ford Focus. Avtovaz's different models have
accounted for almost 80% of the sales under this scheme. Specifically,
its two oldest models, the Lada 2105 and 2107 that have been made since
1980 without interruption: they represent 42% of sales made with a
scrapped car certificate. Their sales price is about 5,000 dollars and
the scrapped car bonus provides a saving of 20%. The scrapped car bonus
has mainly attracted less well off drivers who do not have the means to
buy a branded car. They have scrapped their old cars and replaced them
with identical models but produced more recently. In response to the
demand, the Russian manufacturer's management is now reviewing the
possibility of continuing to produce these old models. They had planned
to stop producing them in 2010 or 2011 due to a lack of sales outlets.
However, the cash for bangers scheme has changed all that. Avtovaz has
just increased its production targets for its old models. This will
safeguard the employment of the teams on its biggest production line who
were facing an uncertain future only a few months ago.
The cash for bangers scheme can be considered to be a brilliant
operation by the public authorities, an event that is sufficiently rare
as to make it remarkable. Many operators in the automotive sector have
been complaining for years that the State does not do enough to support
demand and prefers to finance certain manufacturers, including the least
efficient. In other words, the State injects millions of dollars into
Avtovaz who uses public money to pay its supplier accounts and continues
to produce old models which are less and less demanded, thereby creating
new debts
The cash for bangers scheme is a change of strategy: the public money
used for the operation can now be used to buy models from a dozen
manufacturers. The State can not be accused of favouring poor
performers. Except for the fact that consumers are mainly using the
certificates to buy Avtovaz cars with an obvious preference for the
oldest models. The manufacturer is taking advantage of this to re-launch
its production whilst postponing massive redundancies and the inevitable
social unrest. Even though the method is different, the federal
government has still achieved its objective.
How many cars?
It is estimated that 17 million cars are over 10 years old and 7.5 of these are over 20 years old out of a total fleet of 33 millions according to Autostat. The Russian government initially budgeted 330 million dollars for the cash for bangers programme. Confronted by the measure's unprecedented success, it is planning on doubling the allocated amount. Victor Khristenko, the Industry and Trade Minister, has suggested extending it to buses and trucks with a bonus of 3,000 - 5,000 for trucks.
AUTOMOTIVE DEALERS ARE OBLIGED TO EXTEND THEIR OFFER
The fall in the Russian market has imposed a change in the business model which was too centred on selling new cars.
"Selling new cars provided 65 - 80% of the profits in a car
dealership in Russia before the crisis compared to 15 - 20% from after sales
services and 3 - 10% from second-hand car sales. This is exactly the inverse of
European dealerships where after sales service produces 75% of the profits!"
says Eric Blondeau, General Manager of Nezavisimost, one of the main dealer
networks serving Moscow and its region. He said this during the Russian
Automotive Industry Forum in Spring 2010 at Moscow where much of the discussion
was about the issues related to single brand and multi-brand dealerships.
During the boom in the automotive market, the sales of about 2,600 local
dealerships reached an average of 780 cars per year per dealership. This is
three times the average in Germany. However, the dealerships' business model was
largely based on short term credits and the start of the crisis revealed its
limits. The slump in sales was accompanied by a rise in interest rates and the
virtual impossibility of restructuring debt.
The share of sales due to new vehicle sales at Nezavisimost was 43% and it fell
to 26%. This was still quite considerable compared to the average of 18% in
German dealerships but the dynamic was clear according to Eric Blondeau's
statistics. The Nezavisimost network's portfolio had brands in all price
segments: Audi, BMW, Land Rover and Jaguar, but also Ford, Volkswagen, Mazda,
Peugeot and Volvo. It sold 18,600 new cars and 2,100 second-hand cars in 2009
which was down 37% from the previous year. The result was fairly respectable
compared to the 51% national average reduction.
The Avtomir network is one of the leading multi-brand networks (16 centres in
Moscow and about 20 in the regions) and sold 47,051 vehicles in 2009 compared to
96,900 in 2008. The Rolf network (25 centres in Moscow and St Petersburg) sold
38,893 cars in 2009 compared to 69,900 the previous year. Genser (9 centres in
Moscow and about 15 in the regions): 21,221 cars sold in 2009 compared to 53,300
in 2008. Major (30 centres in Moscow and its region): about 42,000 sold in 2009
compared to 77,300 in 2008, according to the Commersant magazine.
Transtechservice (44 centres in the regions, especially in Tatarstan): 14,963
cars sold in 2009 compared to 30,311 in 2008. Overall, the Russian Automotive
Dealers association members which includes the 12 leading networks (Major is not
a member) sold 203,260 cars in 2009 compared to 399,200 in 2008, a fall of 49%.
The Atlant M network is one of those that has suffered most. The company entered
the crisis with debts approaching 80 million dollars, most of which was short
term debt. Its financial resources were invested in development projects,
building sites and land that were difficult to sell during the crisis. The
company started to implement a broad economy programme from early 2009,
according to Alexei Tereshenko, the Atlant M Development Director. "An
aggressive commercial policy allowed us to reduce our stock of new cars by two
thirds. The marketing budgets were reduced to adapt them to the sales income
forecast. Staff costs followed with reductions of headcount of up to 20% in
dealerships and 35% at the head office. Several dealerships amongst the poorer
performers were closed." Following this reduction in scale, the network has 24
centers at the start of 2010.
Atlant M's sales dropped from 36,200 cars in 2008 to 12,500 in 2009, one of the
biggest falls in the sector. Nevertheless, the company managed to stabilise the
situation. It is now faced with new challenges. Atlant M is currently working on
its business processes for customer relationship management with an
individualised approach in order to increase client loyalty and provide cash
flows from services. This is because the two years of falling sales will soon
start to be felt in terms of the volume of work done under guarantee. The fleet
of foreign branded vehicles that are new to 24 months old will automatically
fall. It will shrink from 4.74 million units in 2009 to less than 2.3 million in
2011 according to Autostat's forecast. This is a fall of almost 40%. The
emphasis is moving to providing services for cars that are over two years old.
This is a more difficult target to attain because it was not given priority
prior to the crisis.
All dealers are looking at investing in new niches to capture clients. e.g.:
Rolf is trying to develop its rapid services. New offers are appearing in the
market. RAT, a national driver's association, is offering dealers roadside
assistance service packs. These packs are realised in partnership with Spanish
operator Mapfre Asistencia and cover 88 towns, mainly in the European part of
Russia.
RENAULT IS FINE TUNING ITS MAJOR PROJECTS
Despite the problems experienced by its local partner, the French manufacturer is developing large scale projects for the Renault-Nissan-Avtovaz alliance.
Avtovaz has announced losses of 1.64 million dollars
and sales income of 3.06 billion dollars for 2009. This is a difficult
situation for a company that already lost almost a billion dollars with
sales of 6.4 billion in 2008. The company remains afloat thanks to
public aid which has amounted to over 2 billion dollars during the last
24 months. Despite the disappointing results, the representatives of
Renault, the French shareholder that owns 25% of the stock, are
confident about the future for the leader in the Russian automotive
industry.
"Avtovaz is an equal member in the Renault-Nissan-Avtovaz alliance. And
one day we will import technologies and models developed in Russia into
France!" hopes Christian Esteve, member of the Avtovaz Board of
Directors. He was speaking at the Russian Automotive Industry Forum at
Moscow. The Alliance's production capacity in Russia is currently
160,000 units per year in the Renault- Avtoframos Moscow factory, which
has since been extended, 50,000 in the Nissan plant at St Petersburg and
up to 900,000 at Togliatti. It already produces eight models and a
further eight models will start being produced in the near future.
According to Christian Esteve, the priority for the Alliance in Russia
is to generate cash to provide manoeuvring space. So it is cleaning up
its financial relationships with dealers. And avoiding being excessive
by sticking to the same range with the Logan 2 and Sandero models that
are currently assembled at Avtoframos in Moscow.
What is the status of the project to transfer the Logan 2 and Sandero to
the Avtovaz factory at Togliatti, often mentioned in the local press? "I
cannot confirm" is Christian Esteve's answer. He emphasises the need to
buy components locally to cope with rouble exchange rate fluctuations:
"I sell cars in roubles so I would like to buy parts and components and
pay for them in roubles." Yes but the task is not so simple as he
confirmed immediately after: "When you bring international supplier
into a local automotive component factory, if it stays more than a few
minutes, you are already pleased...."
What is the status of the project to externalise Avtovaz component
production which is still partly incorporated into the Togliatti
factory? This project was developed by the French and intends to create
autonomous legal structures that would own these production units (see
L'Auto No. 7). "This project is progressing but slowly! You should not
get rid of things that you will regret later." answers Christian Esteve.
The localisation problem affects in priority the models assembled at
Renault-Avtoframos in Moscow: 53,800 Logan were produced in 2009,
equivalent to three quarters of Renault’s sales in Russia. The Sandero
started being assembled there very recently. They will soon be joined by
the Duster 4 x 4, based on a Logan. The Logan assembled at Avtoframos
currently has 44% local constituents in terms of value. Renault does not
like being reminded that the local content rate is not calculated on the
whole of the vehicle but only on the part remaining after excluding the
engine and transmission. Manufacturers have been trying to increase the
number of local supplier for several years. There are about twenty now.
A quarter of these suppliers are located in the Nijni region. The rest
are split between Moscow, St Petersburg, Cherepovets, Lipetsk,
Magnitogorsk, Togliatti, Vladimir and Kaluga. Renault has stated its
intention to increases local content to 10% in the coming years.
However, the production capacity of local component producers has
difficulty in following the demand.
LOCAL TYRE MANUFACTURES HAVE LOST THE COMPETITION
Asian tyres are taking market share from local products. The same applies for the tyre industry's raw materials. Local manufacturers are exiting the crisis at a disadvantage.
The crisis highlighted the defects in the structures of component
companies and other local suppliers to the automotive industry:
inappropriate business models, obsolete equipment, uncompetitive costs.
Not all of them are exiting intact. To understand how the automotive
component industry will recover from the challenges, we have looked more
closely at the tyre sector. The local industries in this sector are
subject to rude competition from both imported products and locally
manufactured products from Michelin and Nokian.
"Russian tyres are much too expensive compared to tyres coming from
Asia. Russian tyre makers use a lot of western components which have
high prices. Another factor is the fact that the price of synthetic
rubber on the internal market is far too high, almost as expensive as
natural rubber on the world market" notes Alexandre Nenakhov, Research
Director at Loil Neftekhim, a multi-brand distributor specialised in
used tyres. Are local tyre makers losing the competition battle? This is
what a number of players in the sector were saying during the Tyres and
Rubber trade fair at Moscow in March 2010.
The market turnover data confirms this opinion. During the crisis, the
market dropped in volume by 38% to 33.1 million units of which 24.5
million were car tyres. The data gives a slightly more accented view of
the market's future. The volume fell by 46% in segment A, 41% in segment
B and 27% in segment C according to data from Sibur Russian Tyres. The
market's value fell by 40% which confirms that people have been choosing
lower quality products. Against this background, Sibur RT and
Nizhnekamskshina, the two local leaders in the sector who are positioned
on the lower segment, retained 17.1% and 15.0% market shares by value,
respectively. They even reported very small rises of about half a point.
However, it is the Asian companies, especially Bridgestone and Yokohama,
who have recorded rises of over 4% each for 2010. These brands now
account for 10.5 and 8.1%of the tyre market in value, respectively,
which makes them the third and fourth biggest players in the market.
They have overtaken the third local producer, Amtel, with its market
share of 7.1% but who is losing speed, and the western companies.
The price of imported products and local products have become very
similar
"For 13 to 15 inch tyres, the price of imported products and local
products have become very similar" confirmed Victor Garbuzov, Director
of the KAMIT's Moscow Office This manufacturer of fibre and fabric based
on fibres used to make tyres is based at Tver and mainly supplies the
Sibur RT factories. According to Mr. Garbuzov, local production costs
are increased by corruption. Obsolete equipment and irregular production
speeds also impact the costs. "The Russian government is too focussed on
the market for raw material. It doesn't support local producers. In the
long term, the local producers could disappear leaving only foreigners"
added Mr. Garbuzov.
"There is no longer a price difference between Michelin, Nokian and
local producers" commented Artur Kasparov, previously Director of the
Krasnoïarsk tyre factory and an Amtel-Vredestein Director. "At Amtel, we
had production costs that were higher than those in the Enschede
factory. The cost structure was also deformed compared to western
standards. Salaries were 8 - 10% in the cost price for Russian factories
- and up to 25% at Enschede. Yet the salaries at Enschede were as much
as ten times higher than that of a Russian worker." The Vredestein
factory at Enschede is no longer part of Amtel following the bankruptcy
of this company and the unit being sold to Vredestein. Amtel's Russian
factories are now in the process of passing under the control of Sibur
Russian Tyres. Sibur is not known for the quality of its management so
the production cost is unlikely to be reduced by this change.
Chinese companies are competing the Europeans in the market of moulds
Chinese companies are starting to provide serious competition to the
Europeans in the market for tyre production equipment, especially
moulds. "Their products are not expensive and the quality is improving
continuously" according to Jan Brambuch, General Manager and founder of
Pneuform, a mould manufacturer based at Zlin in the Czech Republic that
supplies the Sibur Russian Tyres factories at Nizhnekamskshina. "The
speed of supply remains the Chinese companies' weak spot. When Sibur RT
wants 20 - 30 moulds, it's always urgent..." Sibur RT accounts for 80%
of Pneuform's sales in Russia. In the moulds for car tyres segment, the
Russian market accounts of almost 60% of its turnover. In the moulds for
truck tyres segment, the Russian market accounts for about 80%. "We are
mainly competing with the German company A-Z for the Russian market"
says Jan Brambuch. To remain nearer its clients, it has created a JV at
Yaroslavl with local company Fartop: fifteen people work there
maintaining and repairing moulds. Pneuform is trying to position itself
with the future producers who locate to Russia with the aim of having
six client factories for in this market. "We are talking to Yokohama,
they are not certain if they are going to bring their equipment and
usual suppliers as far as Lipetsk." commented Jan Brambuch. The company
intends to position itself on the market for the doubling of the
capacity at the Hankook Hungarian factory.
These observations also apply to the raw material market for the tyre
sector. "Currently, we are seeing the second wave of changes in
suppliers on our market. Each new management team in a tyre maker brings
its own set of suppliers" says Liudmila Shumeiko, General Manager at
Julia, a manufacturer and trader in resins for tyres. According to her:
"when Amtel and Vredestein merged, the Dutch posed one condition for
producing under their brand in Russia: all the raw material had to come
from their usual suppliers, therefore it had to be imported.
Furthermore, these raw materials were often less expensive than those
produced in Russia. This brought about the end of several mid-sized
local suppliers such as Volzhkhimprom . They invested in equipment in
anticipation of orders from Amtel - but there were never any orders. Now
the foreign producers are increasing their prices and there are no more
local producers to provide competition. The foreigners have won."
"Since Sibur RT separated from its mother company, it has had to find
its finance itself. This is why they don't care about any factors other
than the price. They buy low quality Chinese and Korean equipment but
make savings on every line" confided a market source.
Sibur RT is hoping it can re-conquer the heavy goods vehicle tyre market
As it has been unable to recover its market share in the car tyre
sector, Sibur RT is hoping it can re-conquer market share on the heavy
goods vehicle tyre market. "The market for truck tyres in Russia is very
different from the European market. The production local consists of 70
-80% steel belted tyres, 10-15% diagonal tyres and only 5% all steel.
Whilst in Europe, the latter type represents 80 - 90% of the market"
explained Alexandre Nenakhov. "The 5% all steel are produced at
Yaroslavl. They are not of a very high quality. Sibur RT is now trying
to buy new equipment to improve the quality. It has ordered quite a few
machines but does not have cash to pay the balance so delivery is
postponed."
Numerous suppliers have placed their hopes on Nokian's current project.
The Finnish tyre company is busy extending its factory bear St
Petersburg.: its capacity will increase from its current four million
tyres per year to ten million tyres per year in 2011. The project
involves transferring most of its production to Russia where production
costs in its factories are lower than in its factories in Finland.
Eventually, Nokian would like to supply its European clients from St
Petersburg. And suppliers expect the company to start looking at
obtaining supplies from local suppliers. Up until now, they have
imported virtually every component and raw material with the exception
of the cable for the shell and a few other items. Local suppliers had
sent their proposals to the head office in Finland but received no reply
as Nokian preferred to stick with its usual European suppliers. The
local suppliers hope they can now take their revenge.
A LOBBYING CAMPAIGN TO LIMIT CUSTOMS ADVANTAGES
Avtovaz and Sollers are conducting a lobbying campaign to limit customs advantages under assembly agreements. The two local manufacturers are acting to reserve these advantages for projects where the capacity is at least 300,000 vehicles per year. Avtovaz and Soller would then be the only companies to qualify for these tax advantages because most foreign companies' Russian projects have capacities of 30,000 to 120,000 vehicles per year. At present, they benefit from the right to import components with import duties that are less than 5% or even zero. In exchange, they have agreed to create complete production lines and localise part of their component supplies. As the assembly agreements are already signed, it is difficult to see how they could be re-negotiated now. It is probable that the local companies' initiative is aimed at stopping assembly agreements being renewed without change at the end of their, usually, seven year term.
PSA AND RENAULT DEAL WITH LOGISTICS ISSUES
PSA has just implemented a rail supply chain to
supply the PSA-Mitsubishi factory at Kaluga from its Vesoul site in
France. Initially, it is intended to supply for SKD assembly. The
journey takes 5 days. The line is operated by Gefco, the company's
logistics subsidiary, which has reserved 400 wagons for this traffic.
The route goes through Germany and Poland. It then crosses Belorussia
and Russia to Kaluga. Gefco has used Transcontainer, a freight
subsidiary of RZD, the company that operates the Russian railways.
Renault delivers the Avtoframos in Moscow from its Romanian site using
rail and road. A customs office is incorporated into the Avtoframos site
and ensures rapid customs clearance. Renault uses the road for
delivering vehicles within the country with deliveries up 6,000 km away.
"Rail is not competitive when compared to the road, the difference is
over 20%. We only use rail to deliver cars to Vladivostok because
transport to the far east of Russia gets federal subsidies" said
Jean-Philippe Jouandin, Supply Chain Director at Renault.
The Russian rail network is 87,000 km long. It is mainly used for long
distance freight towards the Asian part of Russia and carries 55% of all
freight by tonne-kilometres according to official statistics. The road
network is 745,000 km of paved roads but much of it is in a poor
condition. Road transport carries half the tonnage but over short
distances. River transport is only available for a small part of the
year due to climatic conditions.
AVTOPRIBOR-RAVIV: LOCALISATION IS PROFITABLE ABOVE 150,000 UNITS
"The localisation of dashboard production becomes profitable for a component maker from 150,000 units per year. If the volumes are smaller, the manufacturer must also contribute to the supplier's effort" analysed Ivan Aksenov, Avtopribor Commercial Director. The factory is located at Vladimir, not far from Moscow, and is specialised in dashboards, windscreen wipers and various sensors. It supplies Avtovaz and has become a partner of the Israeli component company Raviv ACS. This has allowed it to turn the corner and become a supplier for western brands. In order to satisfy their requirements, the company has invested in new production equipment that was purchased thanks to a loan. According to its management, the hardest part was reducing the interest rate on the credits: It took several years of negotiation with public banks to get the interest rate down from 22.5% to 18%. Avtopribor currently supplies windscreen wipers for the Renault-Avtoframos Logan and the Kia, and dashboards for Nissan and VW.
VOLVO: ALCOHOL TESTING DEVICE TO ADAPT TO THE MARKET
"We have installed special safety systems to satisfy the specific requests of the local market. Specifically, equipment that monitors driver fatigue and an alcohol testing device that is now a standard installation" testified Lars Corneliusson from Volvo Vostok. The company's Kaluga factory has been operational since January 2009. Volvo Trucks has over 50,000 trucks in Russia and claims to account for a quarter of the fleet of foreign branded trucks in Russia which is estimated to be 210,000 units. Renault VI trucks, Volvo's other brand, account for 8% of this market. Volvo Trucks has just started assembling Renault Trucks in its Kaluga factory. Almost 400 units will be assembled during 2010. Discussions are taking place to start assembling Renault trucks in the AMUR factory in the Sverdlovsk region.
The difficult economic context forces automotive industry employees to present collective demands. Employees at the Nokian Tyres factory at Vsevolojsk have just formed a union that is a member of the local federation of independent unions, the MPRA, where the Ford union is also a member. The new Nokian union has already made contact with Nokian Renkaat Oyi, the mother company's union. Nissan's employees have also just created a union that is affiliated to the MPRA.
2009 RESULTS
Year 2009 saw sales of new cars and light commercial
vehicles in Russia amounted 1,465,917 units, decrease by 49% compared
with 2008, according to the AEB Automobile Manufacturers Committee.
595,839 cars and 126,529 light commercial vehicles were produced in
Russia in 2009, according to the OICA (Organisation Internationale des
Constructeurs d’Automobiles). This is a fall of 59.6% compared to 2008.
Truck sales were 110,210 units in 2009 compared to 300,000 in 2008,
according to ACM Holding. 71,100 units were assembled by local brands,
9,570 units were assembled in Russia by foreign brands and 29,500 units
were imported. This last figure includes both new and second-hand
trucks. The second-hand market for trucks of any brand was 253,300 units
in 2009.
INCREASES AND DECLINES IN 2010
The sales of cars and new LCV amounted to 456,179
units for four first months 2010, among which 312,443 for the vehicles
of world marks imported or assembled in Russia. It’s a decline of 13 %
with regard to the same period 2009, according to the Association of
European Businesses in Russia. The trend overturned in April when sales
added up 163,299 units, that is an increase of 20 % with regard to April
2009.
The first half of 2010 saw sales of new cars and light commercial
vehicles in Russia amounted to 790,517 units, increase by 3% compared
with the same period in 2009, or by 23,304 units, according to the AEB
Automobile Manufacturers Committee.
Car imports were 137,000 units in the first four months of 2010, 26%
fewer than the same period in 2009, according to Autostat. Truck imports
reached 9,900 units during this same period which was an increase of
37.5% compared to the same period in 2009.
Light commercial vehicle sales were 33,825 units in the first four
months of 2010, 14% fewer than the same period in 2009, according to
Autostat. Fiat, Peugeot and Hyundai show the fastest growth in this
segment.
Nearly 37,000 trucks, including 3,913 units from foreign brands, were
assembled between January and April 2010, according to ACM Holding. This
is an increase of almost 50% compared to the same period in 2009.
Nearly 10,737 buses, including 1,939 units from foreign brands, were
assembled between January and April 2010 according to Autostat. This
represents an overall increase of 35% compared to the same period in
2009.
WAITING FOR THE RECOVERY
Things are hard: 1.46 million new cars and commercial
vehicles were sold in 2009 in Russia compared to 2.9 million in 2008.
Sales of cars were 1.3 million compared to 3.8 million in Germany and
2.27 in France in 2009. The Russian market has fallen behind but intends
to catch up in 2010 thanks to the cash for bangers scheme that was
introduced last March. The potential remains high. There are currently
230 vehicles per 1,000 inhabitants in Russia. In 2008, there were 200.
The motor car is becoming accessible to more people; the market will
continue to grow.
Currently, the cash for bangers scheme is helping locally designed cars
in the entry range segment, mainly Lada. A temporary trend as the
attraction of western brands is strong.
During the Russian Automotive Industry Forum last March in Moscow, the
emphasis was on the possibility of partnerships between international
component makers and local companies. This is an important issue because
the local companies are against the wall as their financial difficulties
have been aggravated by the crisis and this has prevented all
investment. The production volumes in western brand factories, which are
becoming more and more numerous, is beginning to justify the use of
complete production cycles by component manufacturers. A place in the
market will start getting more and more expensive.
Alain Bastid
IN BRIEF
To prepare for the start of assembly in the
Hyundai factory at St Petersburg in 2011, the company is busy trying
to renegotiate the end of its partnership with the local company
Tagaz at Taganrog in southern Russia. During the nine years of the
partnership, Tagaz assembled over 300,000 Hyundai cars and
commercial vehicles. The new Hyundai factory is planned to start
operating in 2011 and will have a capacity of 150,000 units per year.
No fewer than seven Huyndai component suppliers are setting up
production on the company's Kamenka site near St Petersburg. The South
Korean company has already announced that it plans to build its own
drawing plant. The factory will be operational in 2011. Its forecast
capacity will be 100,000 units per year which interests the component
companies because it means that local production will be profitable.
Sberbank, a public bank, has become the de facto owner of the
bankrupt Izhavto factory and is trying to negotiate with
Hyundai for the return of Kia assembly to this site. The factory
assembled the Spectra, Rio and Sorento, producing up to 38,000 cars per
year until production ceased following financial difficulties in early
2009. The SOK group which owns the company, transferred it to a
company owned by the factory's senior managers. Izhavto's debts
were almost 500 million dollars and 280 million of this was owed to
Sberbank.
Ford is looking for a partner in Russia to develop the assembly
of its Transit van range. The Company's factory at Vsevolojsk remains
exclusively dedicated to car assembly: Focus and Mondeo. About 630 Ford
Transits were sold in the first quarter of 2010. Its main competitor is
the Fiat Ducato which is assembled locally by Sollers and which
had sales of 1,800 during the same period.
The General Motors factory at St Petersburg is preparing the
start of Opel Astra assembly.
VW is currently installing a drawing unit on its Kaluga site. It
is being installed by a JV with Gestamp and its local partner,
Severstal.
After closing several customs terminals in the St Petersburg region
in spring 2010 following large scale corruption problems, the Customs
authority has opened new terminals dedicated to the automotive sector at
Shushari, to the north of the town. This change has led to interruptions
in the supply chains of the western manufacturers located in this zone.
The first to be affected, General Motors, Nissan and Toyota, have
complained to the Customs authorities. The latest information is that
the Customs authorities could give up the idea of a single terminal
dedicated to the automotive sector. The manufacturers will once again be
able to choose which customs terminal they use. Or even locate one
directly on their site.
Sibur Russian Tyres is conducting a lobbying campaign to prevent
massive imports of used tyres for re-treading. The local tyre company is
mainly worried about protecting its market for truck tyres which is
considers to be promising. However, some people in the profession
consider that used tyres made by European and Japanese companies are
still of a higher quality than new tyres from local brands. And it is
more interesting financially for them to use re-treads. Sibur RT
has asked the government to increase customs duties on used tyres to 20
Euros per tyre instead of the few Euros currently charged or even to
prohibit their importation.
MILESTONES
1.46 million new cars and
commercial vehicles were sold in 2009 in Russia compared to 2.9
million in 2008, according to the Association of European
Businesses in Russia.
595,839 cars and 126,529 LCVs were produced in 2009, down
59.6% compared to 2008, according to the OICA (Organisation Internationale des
Constructeurs d’Automobiles).
790,517: sales of new passenger cars and LCVs increased by 3% or
23,304 units in the first half year of 2010 compared with the same
period in 2009, according to AEB Automobile Manufacturers Committee.
There is 230 cars for 1000 persons in 2010
Demand for automatic gearboxes continues to increase in the
market: they were fitted to half the western branded cars sold between
January and April 2010, according to Autostat. Their share was 45% in
2009.
AGENDA
- MIMS and Automechanika:
August 25th to 29th 2010 at Moscow
Moscow International Motor Show is now the meeting place for car
manufacturers and suppliers from all around the world.
Automechanika show which used to occur in March will be
incorporated into MIMS-Interauto on the same Crocus Expo site.
mims.ru
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.
www.adamsmithconferences.com
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La maquette de l'Auto Franco-Russe a été réalisée avec le concours de l'agence Vingt-Quatre Graphisme