Russia: Renault/Nissan-AvtoVAZ, Ford-Sollers, and VW-GAZ to expand production
GM and Fiat increase production independently while Japanese OEMs plan production in Russian Far Eas
In 2008, sales of vehicles in Russia totaled 2.93 million and were said to soon surpass those in Germany, the largest market (3.37 million in 2008) in Europe. Yet, sales declined by 50% to 1.47 million in 2009 due to the recession, and production of vehicles also shrank by 60% to 720,000.
However, in 2010, with strong crude oil prices, the Russian economy recovered and the Russian government's financial support for the automotive industry and scrappage incentive program succeeded; sales of vehicles recovered to as many as 1.91 million and production doubled to 1.41 million. The Association of European Business (AEB) says that the Russian market is currently recovering to a level close to that before the recession, and forecasted 2011 sales to be 2.45 million.
In February 2011, the Russian government issued a new regulation for vehicle assembly in order to further foster Russia's automotive industry. In order to receive preferential import duties for auto parts, OEMs are required to fulfill strict requirements including annual production of 300,000 and local-content ratio of 60%.
Therefore, many of the overseas OEMs form an alliance with local OEMs to increase production. Renault-Nissan plans to acquire the majority shares of AvtoVAZ in order to further expand their alliance. In order to boost production, Ford forms an alliance with Sollers while VW with GAZ. GM and Fiat each prepare production facilities independently.
Japanese OEMs such as Toyota, Mazda, and Isuzu are currently planning production in the Russian Far East. Among commercial vehicle manufacturers, Kamaz also aims to expand production, while MAN will begin production in Russia.
(Note) Sales of passenger cars and light commercial vehicles by OEM are shown at the end of the report.
In 2010, sales grew by 30% to 1.91 million while production doubled to 1.41 million
In Russia, vehicles sales halved to 1.47 million in 2009 due to recession and production also declined by 60% to 720,000. Yet, in 2010, sales recovered by 30% to 1.91 million and production doubled to 1.41 million. With strong crude oil prices, the Russian economy has recovered; the Russian government's financial support for the automotive industry and scrappage incentive program seemed to have succeeded.
In the January-June period of 2011, sales and production grew by 56% and 64%, respectively. The Association of European Business (AEB) forecasts, in August, that the 2011 sales will be 2.45 million. ASM Holding, which announces production statistics, estimates, in July, that the 2011 production will be 1.95 million (1.713 million passenger cars and 236,000 commercial vehicles).
Automobile production and sales volume in Russia
|2006||2007||2008||2009||2010||Jan.-Jun. 2010||Jan.-Jun. 2011|
|Production of vehicles||1,504,050||1,671,590||1,802,823||724,190||1,406,643||564,843||926,600|
|Production of passenger cars||1,173,624||1,288,652||1,468,579||595,807||1,208,362||487,379||814,900|
|Production of commercial vehicles||330,426||382,938||334,244||128,383||198,281||77,464||111,706|
|Sales volume of vehicles||1,881,420||2,566,531||2,928,054||1,465,925||1,910,573||793,483||1,235,442|
Source: ASM Holdings, Association of European Business (AEB), and others (Note) Sales in 2010 and in January-June 2011 do not include heavy-duty trucks.
Russian government issues a new regulation for vehicle assembly
In April 2010, the Russian government announced its strategy for the development of the automotive industry to 2020. As strategic challenges, the company cited expansion of local production and development of the automotive industry in regions including Siberia/the Russian Far East. As part of measures to meet such challenges, the Russian government continues to maintain high import tariffs for vehicles, which it raised in 2009, and exemption of transportation fees for vehicles from the Russian far east.
In February 2011, in order to further foster the automotive industry in Russia, the government issued a new regulation for vehicle assembly. OEMs that produce vehicles in Russia are required to meet strict requirements including an annual production of 300,000 within three years and local-content ratio of 60% within five years in order to receive preferential import duties for auto parts. Based on this new regulation, the government approved assembly/production plans of four groups - AvtoVAZ-Renault-Nissan, Ford-Sollers, VW-GAZ, and GM.
Russian government announces strategy for the development of the automotive industry up to 2020
|In April 2010, the Ministry of Industry and Trade of the Russian Federation announced a strategy for the development of the automotive industry to 2020. The Ministry forecasts that the 2020 sales and production of passenger cars and light commercial vehicles in Russia will be 3.95 million and 3.43 million, respectively. Among strategic challenges, it cites (1) expansion of local production, (2) acquisition of world-class technology, (3) development of the automotive industry in regions including Siberia/the Russian far east, (4) preparation of infrastructure for R&D, and (5) fostering of engineers.|
Source: various media reports
Russian government continues to maintain high import tariffs for vehicles
|The Russian government raised import tariffs for vehicles as a temporary measure during the nine months from January 2009. In October 2009, the government further extended the measure for another nine months and the tax rate is still the same after the July 2010 expiration. The import tariff for new vehicles was raised from 25% to 30% on average, and that for used cars that compete with Russia's domestically-produced cars (five years old or older) was boosted to 80% on average.|
|Source: JETRO's information on overseas business, various media reports.|
|(Notes) 1.||In August 2010, the Russian prime minister, Vladimir Putin announced through Russia's national television that the government planned to further raise import duties for vehicles. The plan may not be implemented soon, but by suggesting the possible increase, the government is considering promoting local production and new investment by overseas OEMs in Russia.|
|2.||On the other hand, if Russia is admitted to the WTO, with which it is currently negotiating, the government is required to put the import duty for vehicles back to 25% from 30%, which was introduced as a temporary measure. Then, it is expected that the government will be required to further lower it to 15% within seven years.|
Russian government exempts vehicles from Russian far east from transportation fees
|Under the decision made by the Russian government in April 2010, vehicles made in the Russian far east are exempted from transportation fees when they are transported by railway to other regions in Russia. With this exemption, the government compensates for the loss that the railroad companies incur. The total financial amount of the compensation in 2010-2012 is estimated to be 633.1 million rubles.|
Source: Mizuho Research Institute's report (Jun. 30, 2011)
Russian government issues a new regulation on vehicle assembly (February 2011)
|In February 2011, the Ministry of Justice of the Russian Federation issued a new regulation for vehicle assembly in Russia. Under the new regulation, in order to be qualified for exemption and reduction of import duties for parts (up to eight years or by the end of 2020), OEMs are required to increase production capacity to 300,000 a year (when production is newly started) or to 350,000 (when existing facilities are expanded) within three years after concluding a contract with the Russian government. In addition, they are required to increase the local-content ratio to 60% within five years, and to use engines/transmissions made in Russia in 30% of the vehicles to be produced.|
|Semi knockdown (SKD) assembly is limited to 36 months after the conclusion of the contract. SKD production is limited to 5% of the total production. In addition, OEMs are required to set up an R&D center in Russia.|
|OEMs that sign a contract based on the new regulation are required to win approval for their business plans by June 2011. Eighteen projects that are operated based on the former regulation are allowed to continue their business under the former conditions. In addition, if approved, OEMs can conclude a contract based on the former regulation.|
The Ministry of Economic Development of the Russian Federation approves investment plans by AvtoVAZ-Renault-Nissan, Ford, VW, and GM for assembly/production based on a new regulation
|In June 2011, the Ministry of Economic Development of the Russian Federation announced that it had approved four investment plans concerning assembly/production by OEMs based on the new regulation. The approved plans are business plans by four groups including one plan by five companies, AvtoVAZ-Renault-Nissan-Kamaz-Daimler (investment is worth USD2 billion), one by Ford-Sollers (USD1.2 billion), by VW-GAZ (USD0.9 billion), and by GM (USD1 billion).|
|Source: Automotive News (Feb. 27, 2011) and others|
|(Notes) 1.||The former regulation on exemption and reduction of import duties for parts, which was issued in March 2005, requires OEMs to have a production capacity of 25,000 a year. OEMs are not required to achieve a specific local-content ratio, but 30% is said to be the target.|
|2.||Since the same shareholders hold a stake in AvtoVAZ and in Kamaz, the two companies and Renault, Nissan, and Daimler are considered to be one single group.|
|3.||Russia is currently negotiating its accession to the WTO (World Trade Organization) and is expected to be admitted within 2011. Yet, the EU and the USA demanded that the above regulation on vehicle assembly be eliminated (especially the requirement on local-content ratio of 60%) at an early date.|
Russian government continues scrappage incentive in 2011
In March 2010, the Russian government started a scrappage incentive, which supported the purchase of 500,000 new vehicles by March 2011. This scrappage incentive is considered to have boosted sales by about 300,000 in 2010; it greatly increased the domestic sales in Russia. Yet, the scale of the market (1.91 million in 2010) falls short of the Russian government's target of 3 million; the government has continued the scrappage incentive since April 2011.
Russian government continues scrappage scheme in 2011
|The Russian government provides 5 billion rubles for the third scrappage scheme that it starts in April 2011. As in the first and second schemes, the government provides 50,000 rubles to those who purchase new vehicles while they scrap vehicles 10 years old or older. The scrapping incentive is provided up to 100,000 vehicles in 2011 (100 ruble = USD3.5).|
|In the scrappage scheme that began in March 2010, the Russian government provided 25 billion rubles by March 2011 to support the purchase of 500,000 new vehicles. The government is considering a scrappage scheme for buses and heavy-duty trucks starting in 2012.|
Source: various media reports
Renault-Nissan acquires a controlling interest of Russia's largest OEM, AvtoVAZ, to secure 40% share of the market
Russia's largest OEM, AvtoVAZ faced bankruptcy in 2009. Yet, it has been pressing ahead with turnaround through financial support from the government and has also been expanding an alliance with Renault, which holds a 25% share of AvtoVAZ. In June 2011, Renault announced a plan in which it will jointly acquire with Nissan the majority shares of AvtoVAZ in order to secure 40% share of the market in Russia.
Under the three companies' production plan, they will start production of a model based on Renault Logan at AvtoVAZ's plant at the beginning of 2012 to market it under three brands - Renault, Nissan, and Lada. They plan to produce 400,000 of five models that are based on the Logan.
Renault-Nissan acquires majority shares of AvtoVAZ to boost marketshare
|Acquisition of majority shares||In June 2011, Renault and Nissan CEO, Carlos Ghosn, announced a plan in which Renault and Nissan would jointly acquire more than 50% of the outstanding shares of AvtoVAZ. The three companies - Renault, Nissan, and AvtoVAZ - aim to take a 40% share of the market in Russia. Renault currently holds a 25% + 1 share and will raise its stake to 35%. Nissan plans to take a 15% share. The acquisition of shares is expected to finish by the end of 2011.|
|Marketshare||Concerning the marketshare in the first half of 2011, AvtoVAZ (Lada brand) has a 23.6% share, Renault 6%, and Nissan 4.8%. They aim to increase their total share to 40% - 25% by AvtoVAZ, 8% by Renault, and 7% by Nissan - in 2016 (Renault forecasts that the scale of the 2016 Russian market would be 4 million, in which case the 40% share of the market is equivalent to 1.6 million).|
|Production capacity||AvtoVAZ currently has a production capacity of 1.11 million a year -900,000 by the Togliatti plant, 160,000 by Renault's Moscow plant, and 50,000 by Nissan's St. Petersburg plant. The plants of Renault and Nissan are currently in full operation with 3 shifts while the plant of AvtoVAZ is currently operating with 2 shifts. If the AvtoVAZ's plant begins production with 3 shifts, the company expects to add 500,000 to annual production capacity.|
|Model plan||A new assembly line will be set up at AvtoVAZ's plant at the beginning of 2012 to produce a model based on Renault Logan. The companies plan to market the model under three brands - Renault, Nissan, and Lada. Under the Lada brand, two models will be launched at the beginning of 2012 including a model (model name: Largus) based on the Logan MCV station wagon. One model will be launched under the Nissan brand at the end of 2012 while two models will be released under Renault brand in 2013. The companies plan to produce 400,000 of these five models that are based on the Logan. Production of gasoline-powered engines and transmissions for the Logan models under the three brands will begin as early as in 2013.|
Source: Nikkan Kogyo Newspaper (Jul. 1/Jun. 22, 2011), Automotive News Europe (Jul. 20, 2011), and others
AvtoVAZ concludes memorandum of understanding with IzhAvto on bail-out and expansion of production
|In December 2010, three companies - Sberbank (a major bank in Russia), Rostechnologii (a state-run company), and AvtoVAZ - concluded a memorandum of understanding on the upgrading plan for the Izhevsk plant of a Russia-based OEM, IzhAvto. IzhAvto went bankrupt due to the recession and is currently undergoing bankruptcy procedures. The three companies loan 7 billion rubles to upgrade the plant. They are planning to boost its production capacity to 126,000 a year in 2011 and further to 300,000 in 2014. They plant to produce vehicles under AvtoVAZ's Lada brand and Renault's and Nissan's models in the future. An alliance between IzhAvto and Hyundai/Kia, which was initially considered, was cancelled.|
Source: various media reports
Ford establishes an equally-owned joint venture with Sollers to produce Ford Transit
Ford will establish a joint venture company with Sollers, which is Russia's second largest passenger car and light-duty commercial vehicle manufacturer, in order to increase production capacity in Russia. It is said that Sollers dropped a planned alliance with Fiat because the conditions were not met, agreeing to establish a joint venture with Ford.
Ford to establish an equally-owned joint venture with Sollers to increase production capacity to 350,000 a year
|In June 2011, Ford signed a contract with Russia's second largest passenger car and light-duty commercial vehicle manufacturer, Sollers, on the establishment of an equally-owned joint venture, Ford-Sollers. The joint venture company will produce vehicles at Ford's Vsevolozhsk plant, which is in the vicinity of St. Petersburg, and at Sollers' two plants in the Republic of Tatarstan; the 2014 production capacity is expected to be 350,000 a year (Ford currently has production capacity of 125,000 a year). The two companies plan to get a long-term loan of 39 billion rubles from Russian Development Bank (VEB).|
|The company plans to produce six Ford models by 2014. The six models include the Focus and the Mondeo, which are manufactured at the Vsevolozhsk plant, and the Ford Transit medium-duty commercial vehicle.|
Source: Ford and Sollers Press Release (June 8, 2011) and Automotive News Europe (June 9, 2011)
VW signs a contract with GAZ on consignment production of VW/Skoda vehicles
VW signed a contract with Russia's largest manufacturer of light commercial vehicles, trucks, and buses, GAZ, on consignment production in order to expand production. GAZ was on the verge of bankruptcy due to the financial crisis, but started to recover in 2009, when it received an emergency aid from the government; in 2010, it secured a net profit. GAZ is the largest commercial vehicle manufacturer, but has only a 1% share of the passenger car market. Instead of selling vehicles under its own brand, the company has made a decision to win contracts on production of the major foreign OEMs' vehicles in order to benefit from the growing Russian market.
VW signs a contract with GAZ on consignment production of 110,000 vehicles a year
|In June 2011, VW concluded a contract on consignment production with a Russia-based manufacturer, GAZ. GAZ will produce 110,000 VW and Skoda vehicles a year at the Nizhny Novgorod plant starting at the end of 2012. The term of the contract expires in 2019. The company will invest 200 million Euros to expand/upgrade the paint shop and the assembly facilities of the Nizhny Novgorod plant, also constructing a new body shop. First, it will begin producing the Skoda Yeti by the end of 2012 and then will manufacture VW Jetta and Skoda Octavia.|
|VW also plans to boost production capacity of its own plant in Kaluga. The plant is currently capable of producing 150,000 a year. The company is said to be considering a plan to produce low-priced new model based on the Polo.|
Source: VW Press Release (Jun. 14, 2011), etc.
GM prepares total production capacity of 350,000 a year at its own plant and a joint venture plant with AvtoVAZ
GM will expand the production facilities at its own plant in Russia and at a joint venture plant with AvtoVAZ by 2016 in order to boost the total production capacity to 350,000 a year. In addition, GM will also sign a contract with GAZ on consignment production, producing 30,000 of Chevrolet Aveo a year starting in the middle of 2012.
GM expands production capacity in Russia to 350,000 a year
|In June 2011, GM signed a contract with the Ministry of Economic Development of the Russian Federation on the expansion of the domestic plants in Russia. The company will boost production capacity of its own plant in St. Petersburg to 230,000 a year in the next five years and also of a joint venture plant in Togliatti with AvtoVAZ to 120,000 per year, thus preparing a total production capacity of 350,000 (currently 200,000 in total).|
|The company plans to continue production of Chevrolet and Opel vehicles for the domestic market in Russia at the St. Petersburg plant and of compact SUVs, a new version of Chevrolet NIVA, and the Lada 4X4 at the Togliatti joint venture plant. With this expansion, the St. Petersburg plant and the Togliatti plant create new jobs for 1,500 workers and several hundred, respectively.|
Source: GM Press Release (Jun. 2, 2011)
GM: concludes a contract with GAZ on consignment production of New Chevrolet Aveo
|In February 2011, GM singed a contract with a Russia-based manufacturer, GAZ, on consignment production. GAZ plans to produce 30,000 of the New Chevrolet Aveo compact car (sedan and hatchback) a year at the Nizhny Novgorod plant starting in the middle of 2012. Vehicles produced will be sold in the domestic market in Russia.|
Source: GM Press Release (Feb. 1, 2011)
Fiat independently builds a plant with production capacity of 120,000 a year
As a result of unsuccessful negotiations with Sollers, Fiat will independently construct a new plant that is capable of producing 120,000 a year. Judging from the scale of production capacity, Fiat seems to have won approval for the assembly/production business based on the former regulation on vehicle assembly.
Fiat broke off negotiations on alliance with Sollers, independently building a vehicle plant and an engine plant
|Fiat broke off the negotiations on an alliance with Sollers in February 2011. The company turned in a plan document to the Russian government in order to receive preferential treatment on the import of parts based on the new assembly industry measure. Fiat will not form an alliance with Russia-based manufacturers and will independently build a vehicle plant and an engine plant, producing C- and D-segment passenger cars, SUVs, and compact passenger cars under Fiat and Jeep brands. In June 2011, the Russian government said that Fiat would invest USD1.1 billion and have production capacity of 120,000 a year.|
Source: Fiat Press Release (Feb. 25, 2011) and Automotive News Europe (Jun. 1, 2011)
Other Japanese OEMs
Among other Japanese OEMs, Toyota, Isuzu, and Mazda each is planning to produce vehicles in Russian Far East. In addition, Mitsubishi and PSA started production of SUVs at their joint venture plant.
Toyota a joint venture company between Mitsui & Co. and Sollers produces Toyota's SUV in Vladivostok
|Toyota plans to begin assembly/production in the Russian far east in the spring of 2012. First, Mitsui & Co., Ltd. and Sollers, which is Russia's third manufacturer, will establish a joint venture and prepare a plant in Sollers' site in Vladivostok. Toyota will export parts from Japan and other regions to the joint venture plant in order to assemble its SUV, Land Cruiser Prado, on a semi knockdown basis. The company will market the product through its sales network. The monthly production is about 1,000 for the time being. Toyota is expected to acquire a stake in the joint venture when the operations get on track.|
Source: Toyota Press Release (Mar. 1, 2011), Nikkan Jidosha Newspaper (Jul. 5, 2011), and Automotive News Europe (Feb. 10, 2011)
Isuzu to transfer joint production of light-duty trucks with Sollers to Vladivostok in Russian far east
|Isuzu will transfer its production of light-duty trucks in Russia to Vladivostok in Russian Far East in FY2012 (announced in June 2011). The company started joint production with a Russia-based manufacturer, Sollers, at Sollers' plant in the Republic of Tatarstan, which is in the west of Russia, in 2008, but with the establishment of a joint venture, Sollers-Ford, the plant will be switched to a passenger car plant. As a result, the Sollers plant in Vladivostok will produce Isuzu's light-duty trucks. Isuzu plans to produce about 5,000 a year. With this transfer, Isuzu expects to reduce logistics costs including transportation costs of parts from Japan.|
Source: asahicom (Jun. 22, 2011)
Mazda plans to produce in Russian far east
|In June 2011, Mazda unveiled that it had decided to start production in Russia and had won approval from the Russian government. Since exports of vehicles from Japan cost higher due to import duty, the company judged that local production is necessary to expand sales. It says that it will produce 25,000-40,000 a year. According to an official of the Ministry of Economic Development of the Russian Federation, Mazda plans to build a plant with an investment of USD80 million in Russian far east.|
Source: Nikkan Jidosha Newspaper (Jul. 4, 2011) and others
Mitsubishi and PSA: start production of SUVs at Kaluga joint venture plant
|In September 2010, Mitsubishi and PSA began SKD production of a midsize SUV, Mitsubishi Outlander, and its sister models, Peugeot 4007 and Citroen C-Crosser, at the Kaluga joint venture plant. The plant started operations in April 2010 and is currently producing midsize passenger cars, Peugeot 308 and Citroen C4. In 2012, it will step up production including welding and painting, expecting to produce 125,000 a year. Among them, 85,000 are PSA's midsize passenger cars and 40,000 are midsize SUVs of the three companies.|
Source: Mitsubishi Press Release (Sep. 17, 2010) and Nikkan Jidosha Newspaper (Sep. 18, 2010)
Hyundai produces Solaris, a model developed for Russia, at its full-cycle plant
Hyundai build a full-cycle manufacturing plant in Russia for the first time as an overseas OEM, starting to produce the Solaris in January 2011, which is a compact car developed for Russia.
Hyundai starts production of Solaris, a sedan developed for Russia, at St. Petersburg plant
|Hyundai officially started operations of its St. Petersburg plant in January 2011, which it constructed as a full-cycle manufacturing plant including stamping, welding, painting, and assembly. First, the plant produces the Solaris (Korean name: Accent), a new compact car model developed to match climate/road/driving conditions in Russia (a sedan in January. A hatchback is added in May). The production capacity was 150,000. Yet, since the sales of the Solaris in Russia amounted to 50,000 in February, only in half a year, the company plans to boost production capacity to 200,000 a year in August. The company is also considering exporting production models. Hyundai is the first overseas OEM that has operated a full-cycle plant in Russia.|
Source: Hyundai Press Release (Jan. 19/Aug. 5, 2011) and various media reports
Commercial vehicle manufacturers
Among commercial vehicle manufacturers, Russia's largest manufacturer, Kamaz, will boost production capacity to 100,000 a year by 2020. In addition, Germany-based manufacturer, MAN, will start producing trucks in Russia by upgrading its existing plant.
Kamaz to triple production capacity to 100,000 a year by 2020
|Russia's largest commercial vehicle manufacturer, Kamaz will invest about 87 billion rubles by 2020 to triple production capacity of heavy-duty trucks from 2010 to 100,000. The company will also accelerate the introduction of technology from Daimler, with which it is forming an alliance on production and sales of trucks. It expected that the demand for trucks would increase in Russia and in the former republics of the Soviet Union including Kazakhstan due to infrastructure construction and resources development. Kamaz has about 50% share of the market in Russia in 2010. It estimates to sell 38,000 in 2011.|
Source: Nikkei Sangyo Newspaper (Jun. 27, 2011)
MAN to start producing trucks in St. Petersburg in 2012
|In April 2011, MAN signed a memorandum of understanding with the city of St. Petersburg on the start of production of trucks in the city. MAN invests 25 million Euros to upgrade the plant that it acquired in St. Petersburg, thus producing trucks for Russia and CIS countries. Production will begin in 2012. In the medium run, the company plans to increase production capacity to 6,000 per year. MAN has sold an accumulated total of 45,000 trucks and buses in Russia.|
Source: MAN Press Release (April 14, 2011) and Nikkei Sangyo Newspaper (June 27, 2011)
Sales volume of passenger cars and light commercial vehicles by OEM
Sales volume of passenger cars and light commercial vehicles by OEM (locally produced and imported vehicles)
|2008||2009||2010||Jan.-Jul 2010||Jan.-Jul. 2011|
Source: Association of European Businesses (AEB) (Note) Ford's figures include Volvo's figures until 2010. Since Volvo was sold to China-based Geely in August 2010, Volvo's figures in January-July 2011 are included in Geely.