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France-Russia Automotive


N° 9

June 2010


Les Lettres du Fil

Price : 10 € TTC


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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.

The programme for scrapping cars has re-launched production of Avtovaz's oldest models
Hyundai, Tagaz, Izhavto, Ford, General Motors, VW, Douanes, Sibur Russian Tyres…  
the figures of the market  
the next events of the automotive market in Russia  







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.


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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.


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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.


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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.


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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.


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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.


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"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.


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"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.


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  The Russian Interior Minister has opened an inquiry into the corruption revealed by Daimler AG. According to information provided to US courts by the company, its Russian subsidiary, Mercedes Benz Rus, paid backhanders in exchange for vehicle sales to the Interior Minister and other State services from 2000 to 2005, especially to the federal personality protection service which is responsible for the Russian President's security. The signature of a contract for 2.866 million Euros was accompanied by payments of 1.4 million Euros, half the contract's value. The backhanders were paid into the private accounts of Russian officials in Latvian banks. Mercedes Benz Rus sales were worth almost 1.4 billion Euros during this period and 5% of sales were made to ministers and federal services. According to our information, no less than 5 million Euros was paid to Russian officials.    

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  Following several weeks of social tensions and a four hour strike during March 2010, management and the independent union at the Ford factory in Vsevolojsk have reached agreement. The employees have obtained a partial salary raise and adjustments have been made to the collective agreement. The US company's factory has already experienced several strikes including a production line stoppage lasting 25 days in 2007.
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.

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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.


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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.


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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


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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.


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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.


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- 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.

  - The Russian Automotive Industry: March 2011 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.

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