Category: Auto Tips

Made In Russia: Recognizance Not To Leave


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Made In Russia: Recognizance Not To Leave
Made In Russia: Recognizance Not To Leave



Since 2005, automobile companies, both foreign and Russian, have entered into agreements according to which they promised to open assembly plants in Russia, subject to the provision of customs privileges for the import of components. Such documents were signed by 18 firms.

Not all applications were translated into real factories (for example, Suzuki refused to assemble the machines), but nevertheless, already launched enterprises survived thanks to such conditions, and new assembly sites were added to them. Now, the automakers were offered to take “increased obligations”, in exchange having promised an additional grace period of eight years (for more details, see ZR, 2011, No. 3).

On the way to the WTO

But why was such a time period chosen and why were the applicants given so little time to think - just a month (the order was published on February 2, and the agreement should be signed before February 28)? It was about an investment of half a billion dollars on average! Larchik opened simply: our government decided that Russia must (finally!) Join the WTO during 2011-2012.

The conditions for joining this organization provide for a seven-year transitional period during which the newcomer is obliged to reduce customs duties. The Russian Federation will be forced to reduce the duty on cars from 35 to 15%. So they decided, before this happened, to urgently organize large auto-assembly projects … Famously conceived!

Foreign companies are well aware of what game they are entering. The deal, at first glance, is profitable, but no one has canceled the most diverse risks. The main doubt: can the Russian market digest so many cars? Indeed, each manufacturer undertakes to create capacities for the annual production of 300-350 thousand cars and even localize in five years the production of 60% of components, including the production of at least 100 thousand motors in Russia … It is not surprising that only three international representatives signed memorandums alliances, as well as three independent companies.

Gorgeous six

Who are these six? Volkswagen alliances - GAZ Group, Sollers-Ford, AVTOVAZ - Renault-Nissan (with IzhAvto joined them), as well as “loners”: General Motors, Fiat and Magna. In addition, KamAZ and Daimler Trucks agreed to jointly produce trucks - but this is a different story beyond the scope of this article.

AvtoVAZ Union - Renault-Nissan already has the necessary production facilities. Actually, under it, apparently, new rules were written. AvtoVAZ itself is ready to produce annually 600-700 thousand cars and the same number of engines; Togliatti has a motor production and a modern scientific and technical center (the creation of such a center in Russia is also included in the package of new conditions). At Moscow Avtoframos you can assemble up to 160 thousand cars a year, and Nissan has a factory in the Leningrad Region for about two years, the capabilities of which are 50 thousand crossovers and luxury sedans. IzhAvto, which will soon come under the full control of AvtoVAZ, can assemble this year up to 120 thousand cars.

In the long run, the production of the AvtoVAZ-Renault-Nissan alliance in 2020 will reach 1.9 million cars: 400 thousand foreign cars and 1.1 million frets each. Moreover, these will be both budget models (of all three brands!) Assembled on the basis of the B0 (Logan) and Kalina platforms, and very expensive cars (including Renault Latitude and Koleos, Nissan Qashqai and Pathfinder, as well as some Infiniti models).

Of course, the volume of production of these cars will be small - 5% of the declared. But the companies get the right to import components for large-site assembly (body + power plant + chassis) with preferential duties for three years (from the moment of signing the agreement). It remains an opportunity to assemble expensive models at the end of a three-year period. Five years later, the level of localization should be 60%. But this is the average figure spread over the entire model range - for some models it can be more, for others less. At the same AvtoVAZ, which produces exclusively budget cars, the level of localization exceeds 80%. Thus, a large number of cheap models will balance a small number of expensive and very expensive cars with a low proportion of local parts …

Volkswagen has agreed to establish a joint venture with the GAZ Group. It is planned to organize a full assembly cycle of Volkswagen and Skoda cars at the Gorky Automobile Plant - up to 120 thousand a year, and the German concern’s own plant in Kaluga will focus on the production of the popular Volkswagen Polo sedan.” In addition, GAZ is creating a joint venture with Daimler to assemble 30 thousand Sprinter light commercial vehicles since 2012.

A completely new alliance is being created by Sollers and Ford. No one expected the appearance of such a union! Apparently, betting on Fiat in a big game seemed too risky. The alliance will include the Ford assembly plant in Vsevolozhsk and Sollers enterprises in Naberezhnye Chelny and the Alabuga special economic zone. By the way, Sollers will continue to assemble SsangYong off-road vehicles and Isuzu trucks; The Fiat contract assembly will last for some time.

By the way, although the Italian concern signed an agreement of intent to work under the new industrial assembly rules, it now needs to find another Russian partner and (or) a place for the new plant. According to the director of the department of special economic zones and project financing of the Ministry of Economic Development Dmitry Levchenkov, Fiat is studying various sites for construction - in particular, in the Lipetsk region. In addition, the Italian concern was in talks with TagAZ.

The Canadian consortium Magna found himself in a similar situation of restlessness. In Russia, he already has three factories for the production of components, but Canadians did not give up hope to snatch off a contract for the assembly of cars in Russia.

General Motors has other problems. The largest American manufacturer has built its own automobile plant in St. Petersburg (with a capacity of 75 thousand cars per year), it also has a stake in the GM-AVTOVAZ joint venture. In addition, he invested in the Kaliningrad AUTO. All of these sites are not yet fully utilized, and, apparently, General Motors has insured itself for the future, having agreed to contract assembly of a new generation Chevrolet Aveo sedan on the GAZ conveyor (30 thousand cars a year). Thus, the Americans have opportunities for further development - both with the use of their own capacities, and with the help of partners.

It’s not a fact, by the way, that all the participants in the Six will reach the finish line: according to Alexei Rakhmanov, director of the automotive industry department of the Ministry of Industry and Trade, there may be four or five of them at the time of signing the final agreements. But in the future, other companies may join the created alliances. For example, Toyota has already agreed to build Land Cruiser Prado off-road vehicles at the Sollers ’site in Vladivostok - 1, 000 cars a month since 2012. Perhaps a similar agreement with the Sollers will be signed by Mazda.

And also, according to Rakhmanov, the new regime for the industrial assembly of cars aroused interest in more than two hundred component manufacturers. “And this is just the beginning! We hope that at least four hundred of them will come to Russia!”

Alliance scheme (on click opens in full size):

Alliance Scheme


To catch up to June

As long as the existing memorandums are nothing more than agreements of intent, they don’t seriously commit “signatories” to anything. Until June, companies must submit detailed business plans with production development schedules and investment volumes to the Ministry of Economic Development and the Ministry of Industry and Trade, and after their approval they must reach the stage of signing specific agreements - the deadline is set for this by the end of the year.

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