Russia: Opportunities for Swiss Subcontractors in the Automotive Sector
RUSSIAN CAR INDUSTRY
OFFICIAL PROGRAM
PARTNER
RUSSIA: OPPORTUNITIES FOR SWISS SUBCONTRACTORS IN THE AUTOMOTIVE SECTOR Russia will become Europe’s biggest car market by 2020, when it will reach annual sales volume of 4.4 million, the Boston Consulting Group forecasted recently in a study, despite the fact that car sales are projected to decrease in 2013. In mid-term progress since Russia is an emerging market with a low vehicle ownership per capita (280 cars per 1000 people), people are still expected to accelerate their demand for new cars until a saturation point of around 400 automobiles per 1000 residents is reached in approximately 2020-2022. Engines of continued growth, which remain in place, include a relatively small and aging car park, improving consumer income and an unabated appetite to own a respectable and reliable car as a symbol of social status and a sign of independence and personal mobility in a vast country. The current localization process of international car manufacturers in Russia opens several business opportunities for Swiss producers of automotive components and equipment for the automotive sector. The main goal of the Russian authorities is to boost the local production. In this context Swiss automotive suppliers can target several customer groups in Russia: Distributers for the spare part market, International OEMs, National OEMs, Joint ventures OEM, International OES, National OES, Joint ventures OES. International OEMs and OESs may probably stick to their proven suppliers, which they know from other markets. If a supplier does not have such established relations, a more promising strategy could be to tackle the local or joint ventures car and components producers, which are currently looking actively for foreign components in order to increase the quality of their cars or automotive components. In this context many of them will have to invest considerable sums in order to modernize their production facilities. The demand for imported tier 2 and tier 3 components will probably rise within the next year, as the localization of tier 1 components production gains ground in Russia. Here again, international companies will probably rely on proven business relations, but joint ventures or innovative Russian companies could be more interested in new offers. Language: English Number of pages: 130 Author: Julie Bächtold, Senior Trade Advisor, SBH Russia Northwestern Cluster: Daniel Rehmann, RussiaContact Other Reports: Are you interested in other Reports for other sectors and countries? Please find more Reports here: www.switzerland-ge.com/reports
Contents
9.7. Company profiles OES _____________________ 63
1. INTRODUCTION _____________________________5 2. LEGAL ENVIRONMENT/ BUSINESS CLIMATE ____5
9.8. Support Measures of the Nizhny Novgorod Government87 9.9. Support Measures of the Samara Government _____ 89 9.10. Support Measures of the Tatarstan Government ___ 92
3. RUSSIAN MARKET FOR VEHICLES AND
9.11. Support Measures of the Ulyanovsk Government ___ 94
AUTOMOTIVE COMPONENTS___________________12 4. AUTOMOTIVE PRODUCTION IN RUSSIA ________16
10. NORTHWESTERN CLUSTER ________________ 95 10.1. General Information on St. Petersburg / Leningrad
5. SWISS AUTOMOTIVE SUPPLIERS IN THE RUSSIAN
Oblast
98
MARKET ____________________________________22
10.2. General Information on Kaliningrad __________ 100 10.3. SWOT-Analysis Northwestern Cluster __________ 101
6. CUSTOMERS ______________________________24 7. MARKET ENTRY STRATEGIES ________________26
10.4. Company Profiles OEMs __________________ 102 10.5. Company Profiles OES ___________________ 108 10.6. Support Measures of the St. Petersburg Government 119
8. THE CENTRAL CLUSTER ____________________29 8.1. Kaluga Oblast ___________________________ 30 8.2. Moscow Oblast __________________________ 31 8.3. SWOT-Analysis Central Cluster _______________ 32 8.4. Company Profiles OEMs ____________________ 32
10.7. Support Measures of the Leningrad Oblast Government119 10.8. Support Measures of the Kaliningrad Oblast Government ______________________________ 120
11. OEMS OUTSIDE THE CLUSTERS ____________ 120
8.5. Company Profiles OES _____________________ 39 8.6. Support Measures of the Kaluga Government _____ 49 8.7. Support Measures of the Moscow Oblast Government 52
12. EVENTS AND MEDIA ______________________ 127 13. IMPORTANT ADRESSES ___________________ 128
8.8. Central Cluster Development_________________ 52
14. CONCLUSIONS / RECOMMENDATIONS ______ 129 9. VOLGA CLUSTER___________________________53 9.1. The Nizhny Novgorod Oblast _________________ 53 9.2. The Samara Oblast________________________ 54 9.3. Tatarstan ______________________________ 55 9.4. The Ulyanovsk Oblast______________________ 55 9.5. SWOT-Analysis Volga Cluster ________________ 56 9.6. Company profile OEMs ____________________ 56
List of tables
Table 1: Industrial Assembly Regime ____________________________________________________________ 7
1. Introduction After modest beginnings in Tsarist Russia, the Soviet auto industry caught up during the massive industrialization under Stalin and became the fifth largest automotive producer in the world in the 1980s. The annual production at that time was approaching 1.8 million units with most production plants being located on the territory of the Russian SFSR. Nevertheless, from the very beginning, and even in its best years, the Soviet auto industry was heavily dependent on foreign know-how. Ford was a pioneer by establishing the first Soviet mass automaker GAZ in Nizhny Novgorod in 1929 and AZLK in Moscow one year later. At the beginning of the 1960 Fiat was chosen by the Soviet authorities as knowledge partner to build a modern car for the Soviet mass market. In the Samara oblast within only 4 years a huge automotive plant was built along with a new city for more than half a million inhabitants. This city was named Togliatti. The territory of the future Volga Federal district became then the centre of the Soviet automotive industry including Izhevsk (Udmurtia) and its automotive plant built with the assistance of Renault and Naberezhnye Chelny (Tatarstan) with Europe’s largest heavy truck plant KAMAZ, constructed with the support of German and US-companies, as other locations. One of the peculiarities of the Soviet automotive industry was the fact that these plants were designed as huge vertically integrated manufacturing units, where almost every component down to the screws were produced in-house. After the crash of the Soviet Union, the Russian automotive manufacturers continued to produce car models designed in the 1970s. Even today you can see a lot of them on Russian streets outside big cities. Already in the 1990s it became obvious that the Russian car industry cannot bring its production to a decent technological level on its own. As the sector is of tremendous importance for the country with 600 000 people directly being employed and some 23 million involved in related industries, the Russian authorities decided to seek foreign support again. By utilizing the carrot and stick approach they managed to convince the international automobile corporations to first assemble their cars for the Russian market in Russia and later localize the production to a certain grade. Due to the increasing localization of the production of foreign brands and the improvement augmentation of quality and technological level of local brands, the Russian automotive sector opens opportunities for Swiss suppliers.
2. Legal environment/ Business climate After the economic crisis in 2008 it became clear that the Russian automotive industry was in a difficult state 1 and could not recover without external assistance. Given the importance of the sector for the Russian industry as a whole, the government decided to draw an action plan for the restructuring of the sector entitled the “Strategy for the Development of the Automotive Industry of the Russian Federation till 2020”. This strategy provides the framework for the future development of the entire automotive value chain.2 According to the strategy the industrial policy of the Russian authorities should pursue the following priorities in the automotive sector:
Stimulation of development and production of innovative vehicles and vehicle components, creation of new and modernization of operating producing units in the territory of the Russian Federation
1
Minpromtorg Rossii: Strategiya razvitiya avtomobilnjy promyshlennosti Rossiyskoy Federacii na period do 2020 goda, p.11-21 EAC: Market Opportunities for the European Automotive Industry in Russia, Mai 2013, http://eacconsulting.de/uploads/media/Automotive_Studie_Russland_2013.pdf, p. 7 2
RUSSIAN CAR INDUSTRY
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