Category: Auto Tips

Import Will Not Save - There Will Be Local Filling


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Import Will Not Save - There Will Be Local Filling
Import Will Not Save - There Will Be Local Filling

Alexey Rakhmanov


If you want "fat" benefits

Cars carry the emblems of the companies that collect them, which is not entirely true. The fact that they “invest” in each car at assembly plants in the total amount of material and labor costs is only a tenth with a small part. 9/10 - parts, assemblies and assemblies (components) supplied to the conveyor from suppliers, and their “names” are known to few. Meanwhile, the level of perfection of the components largely determines the technical level of the machine.

When automobile foreign companies launched their enterprises in Russia, they imported the lion's share of components from abroad, only a small part, according to the terms of their stay, was obliged to produce them in Russia (to localize production). Such a proportion of imported and local was allowed by industrial assembly-1 regulations, but its validity expires. New rules, industrial assembly-2, with more stringent conditions: if you want to make cars here and at the same time keep “greasy” privileges on imported components, significantly increase the degree of l malization. Russian motives are as follows: new jobs should appear in the country; added value is created in the country, and not abroad; progressive technologies must come to our auto industry so that we, ultimately, learn how to make modern technology.

However, the interests of foreigners diverged from ours.

Create critical mass

- Alexey Lvovich, here is a quote: “There is still no economic sense for foreign manufacturers of automotive components to build factories in Russia, and for auto assemblers, imported components cost about 20% cheaper than local ones." The argument was not given by anyone, but by Mikhail Blokhin, the gene. Director of NAPAK (National Association of Automotive Component Manufacturers), when the industrial assembly-2 regime was still being developed.

- These considerations were true during industrial assembly-1, when for foreigners the mandatory maximum output was only 25 thousand cars per year. Now they have lost relevance.

We were not the first to be in this situation. At one time, automotive foreign firms that settled in, say, China, the purchase of components in the PRC itself was more expensive than their delivery even from distant Europe.

Like the Chinese, we raised the bar for production volumes for “guest” car assemblers to such levels that a certain “critical mass” formed and the laws of the economy started to work - it would be more profitable for suppliers not to bring components to the country across three borders, but to invest in manufacturing them locally and integrate into the technological chain of the local auto industry.

industrial assembly in the Russian Federation


When it is cheaper to spend money

What is beneficial? Modern component factories - production with the highest level of technology and productivity. The situation is typical for European component engineers: in order to produce a batch of parts or assemblies for 25–50 thousand cars, most often it takes a maximum of six months, or even a month, often a week. And the rest of the time the power will be idle? It is unreasonable to invest millions of dollars in enterprises that do not pay off, and the costs lift up the cost so high that no one wants to buy products.

But if the component specialist is confident in stable orders for hundreds of thousands of units, when there are several customers, he will calculate that the cost of transporting components to the recipient can be ruined. And then it’s cheaper to spend some time, but settle closer to the car assembly.

That is why the bar in the regulations of industrial assembly-2 was set at the level of 300 and more than thousands of cars per year for each manufacturer or alliance (so much by the end of agreements with the Russian government). And “the people reached out”: soon after the introduction of the new regulation, we received more than 400 applications from almost 200 component companies, and now about 320 agreements have already been signed.

We expect that the backbone of the foreign firms established in Russia will form the backbone of the new wing of the industry - the component one. That as they grow into our market, these enterprises will begin to use Russian metal, plastics, electronic products more and more, that the products will be competitive. And ultimately, plants will become an integral part of global component production.

To those who want but cannot

- But is there a place under the car industry sun for Russian companies? Or are they doomed to compete with foreign Vikings? And then, those who want but can’t take their place …

- There is such a possibility. From practice: looking for suppliers among Russian component manufacturers, one of the “foreigners” enterprises sent out 130 inquiries to potential profile partners. It would seem that now is the time when everyone clings to any opportunity to receive an order. But only 30 responses were received, and only seven of them satisfied the foreign company. This is an indicator that many of our component engineers are really not pulling, while others are trying to look better than they are.

We are especially careful about the requests of those who for years remained a factory or workshop in the Soviet automobile industry, and budded in the 90s (we have about 800 VAZ suppliers alone). We expect little from those who, for the past 25 years, have been doing, relatively speaking, the lining of the right doors of the VAZ-2105 and nothing more. They do not have their own engineering, the equipment is worn out, the presentation of the quality certificate is blurred, and the specialists are guided by Soviet industrial standards that have fallen into thin air. They understand commerce just enough to agree on a price with the recipient - and no more … We answer this way: you have no business and no prospects … We do not go to an agreement even if there is a suspicion that the applicant intends to "grab and scrabble."

Another thing is that several Russian component engineers are actively looking for strong foreign partners to enter into an alliance with them. They are not driven from the doorway - why not give a chance?

Priority is given to companies with a reputation, for example, Magna, which has already built a stamping plant with us and does not need recommendations, such as Gestamp, Bosch, Continental, Nokian and the like.

industrial assembly in the Russian Federation


You’ll have to bring the best …

- Alexey Lvovich, the Prime Minister once said on a different occasion: “No one will share modern technologies with us.” But after all, adopting them is one of the goals of the automobile industry. Do industrial assembly-2 conditions stimulate us to “bring” advanced production methods to us?

- Modern technology will come. The new regulation does not have control figures, such as “install so many robotic lines” or “introduce so many technical processes”. It is not necessary to establish tough tasks, because it stimulates the requirement: by 2018–2019, the share of added value in the price of components released in Russia should be at least 45%. The normal market situation will push. Who would come to mind in Russia, where they know a lot about cars, to make cars not with an aluminum, say, a roof, but with a wooden one?.. But robots and new technological processes are already being taken - the logic of development itself forces. For example, at the Volkswagen plant in Kaluga, laser welding units operate, which are far from all the enterprises of the concern in other countries.

From criminals to specialists

“And then, the concept of“advanced technologies”cannot be narrowed down to exclusively technical aspects,” continued Alexei Rakhmanov. - Let's remember: when the Ford plant was launched near St. Petersburg, its personnel department refused to work for those who managed to work hard in the Soviet automobile industry - they were considered forever “spoiled” by the old order. I share such caution. From my experience working at GAZ (it was in my youth) I remember who made cars here: temporary workers from among the students sent from the republics of Central Asia, conditionally released criminals who, as they used to say, were “in chemistry”. This was the case everywhere - hence the lowest level of personnel requirements.

Foreign companies transferred European production culture to Russian soil. 130 thousand Russian workers employed in enterprises of foreign companies, including 13-15 thousand engineers and technologists, have already learned the experience of modern labor organization, have learned what is built-in quality, regulation of flows and processes, management of industry business, etc. Here they will be accepted at any enterprise, even at the Toyota plant, which is literally famous for army discipline and where the words “quality” and “order” are repeated as a mantra.

All this not only works for the future of the Russian automobile industry, but already gives results. Everyone can see how the "landscape" of the fleet has changed in the country, and experts will say that the "landscape" of the automotive industry has changed.

The restraining power of price tags

- Wouldn’t it happen that car prices rise when foreign companies begin to supply components - they will want to quickly return the money invested in the creation of production facilities? And then, companies with big names invest “brand tax” in the price of their goods …

- Even before the first stroke in the project of each new model, marketers of companies set a framework for developers: a car should cost no more than such a sum. Indeed, in the “competition of price tags” one cannot lose to classmate models from other manufacturers. The price should not increase neither with the import of components, nor with localized production.

At the car factories, the “target cost” is constantly monitored - what is the cost of manufacturing each component. Suppose, in order to increase the percentage of localization, the manufacturer is wondering: is it possible to refuse to import, for example, a radiator in order to arrange its release on the spot? But if the calculations show that the cost of the part will increase, the option is immediately “crossed out”.

Alexey Rakhmanov


Freedom under regulation

- You won’t “cross out” everything - the “plan” of localization must be implemented. But you can’t do it - you’ll pay with high import duties …

“… which hotheads called arm-twisting.” This is out of ignorance. In China, duties are almost the same as ours, and in India, the amount of duties and excise taxes is close to 60–80% of the price of a car. Please note: both countries are WTO members.

But back to the possibilities of “fulfilling the plan” for localization. Our new industrial assembly regulations, unlike the previous one, provide room for maneuver: control numbers are set for manufacturers; note, on average, over the entire model range. For example, one model can be produced with a localization level of 70%, the second - 80%, the third - 30%, and the fourth can be assembled entirely from imported components (0%). The specialists of the companies are free to determine for themselves which parts and assemblies are more profitable to organize in Russia. I note that the regulation does not make the level of localization and production volumes dependent. The batches of some models, say, 10 thousand units, can be with a maximum level of localization, and cars with a 100 thousand "circulation" with a minimum. If only the average indicator in the annual report was not less than the control 60%. Industrial assembly-2 provides other opportunities for maneuver, but you can’t tell about them in a nutshell.

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