If you can’t read this message, click here WWW.AUTOFRANCORUSSE.FR
Price : 10 € TTC
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.
In this issue
Customs duties came down after Russia joined the WTC but a new "recycling tax" on imported vehicles has appeared. Sales slowed down towards the end of the year; however the market should reach 2.9 million cars and LCVs or the equivalent of the best sales figures before the financial crisis. Renault-Nissan signed an agreement to take over the Avtovaz plant, with Russian Technologies as a partner in a joint venture. Several manufacturers have announced plans to expand their assembly capacity, particularly VW and Daimler on the Gaz site. Yokohama is still cultivating its brand image, whereas Continental is promoting its off-take agreement with a local tyre producer.
THE NEW TAX ON IMPORTED VEHICLES CAME INTO FORCE
It is called a "recycling tax" but looks more like compensation for the reduction in customs duties. The new customs barrier is higher than the one it replaces.
Only just into the WTC, Russia has established new
customs barriers that are higher than those it has just abolished. The
new "recycling tax" will be applied to vehicles when they enter the
Russian market from 1st September 2012. It will be used to create a
future deconstruction network for vehicles that have reached the end of
their life cycle. Both the aim and amount of this recycling tax have
been decided somewhat precipitously. Before the Russian government had
even decided the method of operation or the economic model of the future
deconstruction circuit and before providers had been chosen or even
approached, the amount of the tax to fund the operations had already
been decided on by the administration. It will be between $860 and $3500
for imported vehicles depending on their horsepower, $5000 on average
for LCV utility vehicles and up to $17,000 for trucks. The amount will
compensate for the reduction in customs duties which fell from 30% to
25% for vehicles in the summer of 2012 as part of the process for
entering the WTC. Subsequently, customs duties will fall progressively
from 25% to 15% over the next six years.
RENAULT AND NISSAN FINALISE THE PURCHASE OF AVTOVAZ
Renault-Nissan and the public holding company Rosstekhnologii
(Russian Technologies) have signed a joint venture agreement over the Avtovaz
plant. Initialled on 12 December 2012, under the agreement Renault-Nissan will
invest $742 million and receive a 67.13% share in the Alliance Rostec Auto BV
joint venture by the end of the first half of 2014. The latter will hold 74.5%
of Avtovaz. The remainder of the plant's capital is on the market.
|KALUGA, A TOWN TURNED TOWARDS TO THE AUTOMOBILE
"Our region has made efforts to welcome Western
automobile manufacturers; it had to borrow money to develop sites
intended for industrialists. We are now reaping the rewards as Western
manufacturers working in the Kaluga region produced 185,000 cars in
2011, or 10% of the entire Russian market's production", said
Vladimir Popov, responsible for economic development in the region.
HAS THE INCREASE IN TAX HELD BACK CAR SALES?
With the 12% forecasted by the AEB, the increase in
car sales in the Russian market is still very good, especially when
compared to other markets. But this result calculated over the year
hides trends that are rather worrying. After an average growth for the
two quarters of 2012, the large manufacturers' sales started to stagnate
towards the end of the summer. In the autumn, this growth shut down
extended to most brands. In November 2012, the market showed no growth
compared to the same month in 2011.
FORD MOVES IN WITH SOLLERS
Ford is deploying a new local partnership with Sollers in Tatarstan. Sollers plants should be assembling up to five models of the seven that the American manufacturer has planned to assemble in Russia. Sollers will be restarting plants in Elabouga and Naberezhnie Chelni. These have not been very active since its assembly and distribution partnership with Fiat was ended. Sollers will also recruit up to 1000 people to work on its new project with Ford. Sollers recorded $1.01 billion turnover for the first six months of 2012, or a fall of 8.4% on the same period in 2011. The net profit is $85 million. The company's net debt is $359 million.
RENAULT AVTOFRAMOS CHANGE THE RHYTHM
Renault's success in the Russian market where the
brand is the third largest on its own, before projects with Nissan and
Avtovaz are included, is encouraging the manufacturer to increase its
capacity on its Avtoframos assembly site in Moscow until the Avtovaz
plant gets going. The Avtoframos’s plant capacity will be increased
188,000 units this year. More than 175,000 units were planned in the
initial expansion project. The additional capacity was reached by the
installation of new machines and by reorganising work times. "We are
in the process of moving from three 8-hour shifts to 11 hour shifts, but
with the same number of teams", explains Bruno Ancelin, Managing
Director of Renault Russia. Shifts will take over from each other at a
more complex rhythm than currently with a three day weekend and another
one day one for each shift. The new rhythm was introduced progressively,
firstly presented to the different management levels and then tested
with a team of volunteers before being presented to all staff. It will
be effectively introduced after the summer holidays of 2012.
DAIMLER WILL ASSEMBLE ITS LCV AT GAZ
Daimler is preparing to build an assembly workshop for its Mercedes Sprinter LCV in the Gaz plant in Nijni. The future site will have a capacity of up to 25,000 units a year. Part of the equipment will be transferred from the manufacturer's plant in Argentina that assembled the same model. The choice of an old model enables the manufacturer to reduce the price positioning of its LCV and expand the potential customer base. In the long term, Daimler plans to locate production of its OM 646 engine in the Laroslavl engine plant which is part of the Gaz group. The future Sprinter will be commercialised by the Mercedes-Benz Rus network. Assembly should start in 2013.
A NEW ASSEMBLY SITE FOR VW
VW launched its new assembly line in Nijni on the site of the local manufacturer Gaz at the beginning of December 2012. The new production capacities will complement those of the existing plant in Kaluga to meet increased demand. The Nijni plant will assemble VW Jetta, Skoda Yeti and Skoda Octavia models, at a rate that should reach 110 units in 2014. The manufacturer has invested almost €100 million to locate its assembly in CKD. It was able to partially reuse machinery purchased by Gaz to assemble its Siber model that proved to be a failure. Parts will come from the manufacturer's plants in Germany, the Czech Republic and Mexico. The plant will employ up to 2700 people. VW had to make a commitment to Gaz to limit salaries to $680 before bonuses so as to not upset the local human resources market.
ALL-OUT INVESTMENT FROM GM
GM has planned to invest up to $1 billion over the next five years to increase its industrial capacity in Russia. Its Chevrolet brand is now the second-largest in terms of sales in the Russian market. The manufacturer is expecting to double production in its St Petersburg plant to 230,000 units. The site assembles its best performing models, the Chevrolet Cruze and the Opel Astra. At the same time, GM plans to increase the capacity of its joint venture with Avtovaz that assembles the Chevrolet Niva model. This slightly old Russian-designed 4x4 updated by the American manufacturer is still in demand from drivers in the Russian regions. GM announced that up to $200 million total investment will be intended to increase the joint venture’s production from 70,000 units currently 120,000 units. However, the production on the Chevrolet Niva assembly line has not exceeded 5000 units a month over the last 12 months. GM’s announcements meet the terms of an assembly contract that the manufacturer signed with the Russian government. They set out a commitment to produce 350,000 units per year in exchange for customs facilities.
MAZDA WILL SET UP IN VLADIVOSTOK
Mazda Motor Corporation has inaugurated its assembly plant in Vladivostok, a Russian port on the Pacific Ocean. Run as a joint venture with Sollers, the site should start assembling Mazda CX-5 and Mazda 6 in SKD Its initial capacity is 50,000 units a year. In the long term, it should employ 3000 people. The partners have planned to double capacity and move to CKD assembly within two years. The total investment should reach $320 million. The Vladivostok site has the advantage of easy supply by sea from the different plants with access to the Pacific. This advantage turns into an inconvenience when it has to assemble vehicles for the interior market. Isolated from the rest of Russia, the Far East region is sparsely populated. It has 6 million inhabitants and a declining population, a low density and a few practicable roads linking towns that are a long way apart. A single railway line connects the Far East to the Russian metropolis and the national railway operator applies monopolistic prices. The Russian president, Vladimir Putin, who was present at the launch, promised the Mazda-Sollers joint venture "subsidised prices to carry cars assembled in Vladivostok to European Russia". He also added that these subsidies will only be maintained whilst the new company is establishing its business.
GAZ STARTS ASSEMBLING IN BELARUS
The Russian manufacturer Gaz has launched a programme to assemble trucks in neighbouring Belarus. The programme will involve its old 4.5 tonne 3307 model that has not been produced by Gaz for two years. The assembly line was installed in the service centre in the suburbs of Minsk. The truck will be fitted with a Euro 3-standard engine produced by the Minsk engine plant. The manufacturer is counting on a 2500-unit market per year. It is also planning to organise a trade-in program for its old trucks. The fleet of out of date Gaz trucks is estimated to be more than 30,000 units in Belarus.
YOKOHAMA IS TAKING CARE OF ITS DEALERS
Yokohama’s plant in Lipetsk in the south of Russia
started serial production in 2012. "The tyre manufacturer expects to
reach its total capacity of 1.4 million tyres a year in 2013." We
started producing winter tyres that we have delivered and now we are
attacking production of summer tyres. All tyres produced in our Russian
factory are sold in the Russian market. We continue of course to import
cars from our Asian plants in Japan, Thailand and the Philippines",
says Yumoto Mitsuyuki, Yokohama Russia’s Vice-President. Most of the
country, from the west of Russia to Irkoutsk in Siberia is supplied by
the Russian plant. Everything to the west of Irkoutsk is supplied from
|CONTINENTAL IS LOOKING TO DISTANCE ITSELF FROM ITS OFFTAKE PARTNER
|Continental is running a communications campaign with tyre distributors and dealers praising the quality of its offtake heavy goods tyres produced by the tyre producer Nizhnekamskshina in Russian Tatarstan. These are all-steel tyres produced on the production line provided by Continental with a total capacity of 1.2 million units per year Part - about 20% of production - is intended for the German tyre producer. These tyres are sold in the Russian market under Continental and Matador brands. Most of the line is commercialised by Nizhnekamskshina under its own Kama ZMK brand. Continental insists on the quality of tyres produced under its own brands, "The quality of the raw materials used in production and compliance with the production process is checked by representatives of the brand", according to documents distributed to partners. It insists on the fact that the quality of Kama ZMK tyres and the raw materials used in a production are not guaranteed by Continental. Russian consumers confuse offtake products and those produced under the Kama ZMK brand and tend to be wary of the quality of tyres produced by the local partner. Offtake production is a stage in the development of the German tyre producer in Russia. Continental has started building its own plant in Kaluga. The site should be operational in 2013 and produce passenger car tyres with a possibility of producing other types of tyre subsequently.
|MICHELIN REWARDED BY THE GIPA
|Michelin received GIPA Russia Prize, awarded for the quality of its sales support by multi-brand dealers and official dealers. The French tyre maker was the main sponsor of the latest MMAC exhibition in Moscow in August 2012. It launched its latest range of winter tyres specially adapted to the conditions of the Russian winter, the X Ice 3. "It's a tyre that provides both grip and excellent safety conditions, that is very long-lasting and has an excellent eco-performance. It is particularly aimed at heavy users of roads in a wide variety of conditions" says Thierry Chiche, Michelin Russia’s Director General. "Russia is a very demanding market and Michelin is striving to meet its requirements with a number of innovations. After the XM2 and the X Ice 3, we are now launching the Primacy 3 for large saloon cars at the beginning of 2013".
|IMPORTS OF USED CARS PENALISED AGAIN
|The new recycling tax (see in this issue) is hitting importers of used cars hard. They have benefited from a 35% to 25% reduction in the special customs barrier that has been in place in recent years. However, they are now being asked to pay a new "recycling tax" of between $5300 and $22,600 to import a car more than three years old. The result appears very negative for operators. The "recycling tax" for imports of used trucks is as high as $61,000.
|THE GOVERNOR OF ST PETERSBURG ASKS COMPANIES TO MOVE THEIR HEAD OFFICES
|The governor of the region of St Petersburg is asking car manufacturers who have set up assembly plants in the region to transfer their sales departments responsible for the Russian market there. "We want to be able to include the manufacturer’s sales in our region's tax equity" says Georgy Poltavchenko, the governor of St Petersburg. Currently, all manufacturers have their Russian head offices in Moscow. The St Petersburg region is home to Ford, Nissan, GM, Hyundai, Toyota plants. A MAN assembly site will soon be operational. However, the governor does not mention why the manufacturers would be attracted to his request.
|LUIDOR, A RUSSIAN COACHBUILDER CREATOR OF MINIBUSES
|Most Russian coachbuilders are located in the region of Nijni. These LCV transformation specialists are expanding out from the Gaz plant whose Gazel utility vehicle was suited to all types of transformation. Several of them are now changing target in an attempt to go upmarket. Such as Luidor that is working with VW and Mercedes for example. "Can we are not strictly speaking a coachbuilder", Serguei Chupreev, Luidor’s regional director said. "We take VW Crafter utility vehicles and recreate a bus from the existing bodywork. It is an industrial operation that transforms the purpose of the vehicle, from a utility to a minibus that can carry 21 passengers. There is a high demand for this type of vehicle in the Russian market. Other models provided by Western manufacturers are expensive and this creates a market for us". More than 300 vehicles leave Luidor’s workshops every month. This change in purpose is the criteria chosen by the Ministry of the Interior to say that this is no longer the vehicle for which the recycling tax was paid (see article in this issue). They are requesting the payment of this tax for a second time when delivering the "technical passport", the document that authorises the commercialisation and roadworthiness of the vehicle.
|AT AMUR, THE WORKERS ARE ON HUNGER STRIKE SO THEY CAN GET PAID
|The stopping of work at the AMUR car factory in Novouralsk (Sverdlovsk region in the Urals) has caused a resounding social conflict as 57 workers have started a hunger strike. They have not been paid for several months and are protesting against the presumed desire of shareholders to close the company without paying the late salaries. In administration since July 2011, the company has been running up late payments. The debt towards the 560 employees has reached $1.15 million, but three quarters of the staff have already left the plant with no hope of being paid what is due to them. AMUR assembled small quantities trucks and utility vehicles for India's Tata as well as China’s FAW and Geely and specialist locally-designed vehicles for municipal services. Discussions with Renault Trucks to assemble the Renault Midium were not successful.
CARS AND LCVS: A GOOD 2012 BUT WITH NO GROWTH AT THE END OF THE YEAR
2.68 million cars and LCV utility vehicles were sold
in the 11 months of 2012 according to statistics from the Association of
European Businesses in Russia. Forecasts for November were 239,000 units
enabling the AEB to expect sales equal to or greater than 2.9 million
units. If this forecast were to prove correct, the market would be the
same size as it was in 2008, its best year before the financial crisis.
|Learn more about the AEB
The Automobile Manufacturers Committee of the
Association of European Businesses in Russia publishes the monthly
statistics for sales of cars and commercial vehicles, of all
manufacturers, Western and local, operating on Russian territory.
Without distinction, the statistics cover the sales of new vehicles
assembled on-site or imported.
COMMERCIAL VEHICLES: LOW GROWTH IN 2012
The commercial vehicles market grew slowly in the
nine months of 2012 and even shrinking in relation to 2011 in the 16
tonne or more truck segment according to AEB statistics. In this
segment, as well as the 6-16 tonne one, an average growth in imports
stopped in September following the introduction of the recycling tax
Peugeot wants to extend its network in Russia
to 85 sales outlets by the end of 2012. This will enable the
manufacturer to cover 91% of the country. The 408 will be the first
model to the assembled in the Kaluga plant according to complete
manufacturing cycle rules.
|41% of vehicles are less than five years
old in Russia, according to the GIPA. However, Russian statistics
still show more than 50% of vehicles are more than 10 years old. The
majority of these are vehicles that have already been destroyed but were
never removed from official statistics.
82.5%: Western brands’ share in the passenger car market in the first half of 2012 according to the magazine Autobusiness. It was 75% one year previously.
3%: the share of cars with diesel engines in Russia compared to 24% in France.
|The Russian Automotive
Forum : from 9 to 11 April 2013 at World Trade Centre 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.
|Tyre and Rubber Expo : from
23 to 26 April 2013, at Moscow, Expocenter.
Over 200 manufacturers will introduce their range of tyres for all types of vehicle, rubber parts for the automotive industry, raw materials and components for the tyre industry, as well as the parts for production, recapping, balancing etc. The organisers are expecting 7,000 trade visitors.
Automechanika powered by MIMS : from 26 to 29
August 2013 at Moscow, Expocenter Krasnaya Presnia.
|Interauto : August 2013 at Moscow, Crocus Expo.
The 9th International exhibition InterAuto will be held in August 2013.
Comtrans 2013 : from 10 to 14 September 2013 at Moscow, Crocus Expo.
To receive the next issues of the France-Russia Automotive/Auto Franco-Russe, fill the subscription form : www.autofrancorusse.fr
|The France-Russia Automotive is published by the Agence du Fil SARL Company. RCS Paris 487 788 051.
La maquette de l'Auto Franco-Russe a été réalisée avec le concours de l'agence Vingt-Quatre Graphisme