HomeThe ProfessionalAutomakers flock to ‘dynamic’ Russia

Automakers flock to ‘dynamic’ Russia

LUXURY cars to pamper the inner oligarch caught the eye when the Moscow motor show opened last week, but it is the Russian of more modest means who has the attention of the world’s carmakers, keen to profit from one of Europe’s few growing markets.

Report by Windsor Star Online
Bullish forecasts were the order of the day at the Moscow International Automobile Salon, with Volkswagen forecasting 30% sales growth in Russia this year and announcing US$1,3 billion in new investments.

General Motors will also spend US$1 billion over the next five years to ramp up output in Russia, and Renault sees Russia challenging Brazil to become its number two market.

“The situation is very different from Europe and the US, because you have a lot of people that have very old cars –– or no car –– (who) are entering the market for new cars,” Renault’s regional head Bruno Ancelin said.

“It is a tank of potential customers that is still full, and we have years and years in front of us to address this kind of customer.”

Organisers expected more than a million people to visit the annual show, which opened to the public last Friday. The show features 24 world premieres of new models, the first showing in Europe of 21 models and 86 Russian rollouts.

Speed freaks will get a chance to ogle a Maserati GranCabrio Sport, with a top speed of 285 km/h and a local sticker price of US$264 000 in the Russian market. More than 40 Maseratis –– controlled by Fiat –– have been sold in Russia so far this year, a representative said.

But although Russia remains a tempting market for manufacturers of machines for conspicuous indulgence, automotive depression in western Europe and the steady, oil-fuelled growth of the Russian economy have made the continent’s second-biggest car market an object of urgent desire for those offering more everyday rides. These range from the sub-US$10 000 compacts that Renault and Nissan are pushing-out under the rejuvenated, Soviet-era Lada brand of their Russian unit AvtoVaz, to well-appointed, mid-range sedans and passenger vans aimed at the burgeoning middle class.

Fiat, under its own mass market badge, is looking to the modern, well-to-do family to pitch its new seven-seater Freemont, on display in Moscow with the obligatory troupe of glamour models clad in black dresses and silver suits.

“It’s a dynamic market and one of the few showing growth,” said John Stech, who is head of Fiat’s Chrysler unit in Russia and manages sales and distribution of Fiat, Jeep and Chrysler.

“There’s great potential as incomes develop.”

A profusion of vehicles “fully loaded” with optional extras delivering comfort and convenience, such as satellite navigation, seems to overshadow examples of the muscle-bound bling that was once the trademark of Russia auto displays. “There are many stereotypes of the Russian market,” said Chrysler’s Stech. “At one point it was a macho vehicle market –– less so now.

“We have customers who appreciate value but are not looking at showing off –– they are more modest.”

Car sales in Russia grew by 40% last year in volume, to more than 2,6 million vehicles, recovering most of the ground lost after they halved in the slump of 2009. Insiders expect the figure to reach or beat three million this year.
Francois Goupil de Bouille, head of Nissan’s Russia office, said he expected the Russian market to hit four million vehicles in 2015 and become the top market in Europe by 2014-2015.

In money terms, sales grew by 70% last year to nearly US$60 billion buoyed by a state-backed scheme that encouraged drivers to dump dilapidated Ladas and buy new models, estimates consultancy PwC.

Sales of foreign brands made in Russia topped one million for the first time in 2011.

Growth has slowed this year to 14%, but the industry will continue to enjoy support from government incentives to localise production put in before Russia joined the World Trade Organisation last month. Stiff import taxes had pushed several big foreign manufacturers to set up production inside Russia.

Foreign carmakers, while officially welcome, have faced the difficult choice between partnering with struggling local manufacturers such as state-controlled AvtoVAZ, and building their own factories.

Volkswagen, Europe’s largest carmaker, has opted for the “greenfield” route, building out its production base in the Kaluga region south of Moscow.

It has announced plans to double its investment in Russia to two billion euros by 2018, expanding its Kaluga operations to meet growing demand and hit a mid-term sales target of half a million vehicles in its most important European growth market.

“There’s high demand for luxury cars, especially in regions like Moscow and St Petersburg, (but) if you travel over the countryside it’s a bit different,” said Michael Macht, VW’s management board member for production and logistics.

GM has shifted toward its own production after first partnering with AvtoVAZ to build the budget Chevrolet Niva sport utility vehicle, designed to cope with the rutted and ice-ravaged roads that constitute most of Russia’s national network.

Recent Posts

Stories you will enjoy

Recommended reading

You have successfully subscribed to the newsletter

There was an error while trying to send your request. Please try again.

NewsDay Zimbabwe will use the information you provide on this form to be in touch with you and to provide updates and marketing.