MOSCOW. (RIA Novosti political commentator Alexander Yurov)
The Russian car market is very attractive - more than 1,500,000 cars are sold at it every year. Moreover, it keeps growing, and by 2008 this figure will approach 2,000,000.
So far the Russian carmakers are confidently in the lead in the number of sales. AvtoVAZ alone sells more than 700,000 cars. Russia has other big plants - AvtoGAZ and Izhmash, for one. For comparison's sake: altogether the foreign companies sold in Russia close to 572,000 cars in 2005. However, the statistics of trade in foreign cars is changing fast. Last year alone the number of foreign cars brought into Russia increased almost by 50% as compared with 2004.
Interestingly, these incredible growth rates pale into insignificance when compared with the plans of the Russian Cabinet of Ministers. Today, the government is involved in negotiations with 10 major world car producers. The names of these companies are not disclosed. But the government expects to sign contracts with them on car assembly in Russia before this year expires. Under the government-endorsed innovation scenario of Russia's social and economic development, by 2007-2009 the number of cars made in this country should grow up to 1,500,000. In other words, the number of cars manufactured in Russia will at least double.
There is more to it. On the eve of Russia's WTO entry, the authorities are trying to make the produce of Russian plants more competitive. Managers from Rosoboronexport (state-owned arms trading firm) have already been involved in this effort. At the same time, Vheshtorgbank (foreign trade bank) will give AvtoVAZ credits at a better rate - 1.5%-2% lower than offered by other Russian banks. Additional funding should support the production of automobiles in the current price category. Practically all models produced by the plant are under $10,000. These measures are expected to allow AvtoVAZ to keep its share in the market up to 2010. What happens next is a question.
The automobile plant has to compete against a diverse flow of foreign cars, which is not easy. More and more foreign cars have prices, which are close or even identical to those of Russian models. For example, last year saw the emergence on the Russian market of the Renault Logan, while this year started with a record-setting growth in the sales of the Chevrolet Lanos of Ukrainian make. Bottom-end models of those cars cost less than $10,000. But both models are pathetically simplistic.
Foreign companies are resorting to other ways of boosting sales in Russia. All economic methods are good for this purpose. The Renault company has designed a special model for Russia. But this is not all. Knowing that the manufacture of cars in Russia is 15% less expensive, Renault has set up a joint venture with the Moscow City Government for the Logan production -- Avtoframos. It is located in Moscow, the center of the domestic demand for cars. Sales in the Russian capital are traditionally the highest. This strategy allows the top managers of Avtoframos to set truly ambitious goal of producing 200,000 cars a year in two to three years' time.
Ford took a different option. Its managers did not simplify the Focus in the fight for the Russian consumer. To save on transportation costs, rent and wages, they built an assembly plant not far from St. Petersburg and the Russian border. Land is cheaper there and labor is not as expensive as in Moscow. As a result, the company has received a car with a slightly higher price tag, but still very popular in Russia. It is planning to turn out about 60,000 cars at this plant in 2006.
The confident leaders in the sales of foreign cars in Russia - Korean carmakers - are following the same road. But there is one difference - they do not build new plants. Almost all Korean companies, which have established themselves on the Russian market, are using the existing Russian enterprises. This is the cheapest option. It cost Ford about $150,000 to launch its production line in Russia, whereas the manufacture of the Korean SUV Rexton was almost twice cheaper. This is the most promising option for the Russian specialists as well, including those in the Ministry of Industry and Energy. The Russian authorities have said more than once that an alliance with giant foreign carmakers is the only promising option for domestic car manufacturing. They will help Russian plants to modernize production, start making modern models, and gradually expand the range of spare parts of Russian make.
Nevertheless, the Russians are expecting domestic carmakers to boost their production figures because their share of the market is too big. It is perfectly obvious that it is impossible to double the car fleet of Russia without developing traditional domestic assembly plants.
