Russia becomes second largest vehicle market in Europe

Sales of 2.85 million units expected in 2012

2012/12/07

Summary

Vehicle production and sales in Russia

Share of new car and LCV market in Russia

 The vehicle sales in Russia increased in 2011 to 2.65 million units, up 38.7% from the previous year. The market has now become the second largest in Europe after Germany. Robust consumer spending supported by expanded export of crude and other resources has buoyed the sales.

 In 2012, steady growth has been continuing, with slightly reduced growth rates. The vehicle sales in full 2012 are expected to reach 2.85 million units, up 7.4% y/y. The production volume has been fairly expanding as well with 1.99 million units in 2011, up 41.8% y/y. The volume in full 2012 is forecast to increase by 11.3% y/y to 2.22 million units.

 As for the market share by manufacturer, AvtoVAZ that held 27% in 2010 has gradually been reducing it to 19% in January-October, 2012. Foreign OEMs including Hyundai and VW, on the other hand, are expanding shares.

 Russia has formally entered the WTO in August 2012. Auto industry officials pointed out concerns over impact of lowered import tariffs as a result of the entry. In September 2012, the Russian government newly introduced a recycling tax on vehicles. Since the tax rates are set higher on imported and used cars, it is regarded as a measure to protect the domestic auto industry from lower tariffs after Russia's WTO accession.

 In order to address the expanding Russian market, many foreign OEMs are teaming up with local OEMs to strengthen their local production. The Renault-Nissan Alliance will acquire a majority stake in AvtoVAZ and expand the partnership to raise the combined production capacity of the three OEMs to 1.6 million units per year. GM will boost capacity both at its independent plant and the GM-AvtoVAZ JV plant. Mazda will increase capacity at its JV plant with Sollers. Fiat will partner with Russia's largest state bank Sberbank to build a plant to produce Jeep brand vehicles.


Note: Sales volumes of passenger cars and light commercial vehicles by OEM are listed at the end of this report.



Sales of 2.85 million units and production of 2.22 million units anticipated for full 2012 in Russia

 The vehicle sales in Russia dropped 50% from the previous year to 1.47 million units in 2009, due to the financial crisis. The sales, however, recovered in 2010 to 1.91 million units, up 30.5% y/y and in 2011 to 2.65 million units, up 38.7% y/y. The production volume was doubled to 1.41 million units in 2010 from 720,000 units in 2009, and expanded to 1.99 million units, up 41.8% y/y in 2011.

 The January-October 2012 vehicle sales rose by 12.9% y/y to 2.44 million units. According to Association of European Businesses in the Russian Federation (AEB), the Russian market should continuously expand in spite of its decelerating growth rate. AEB, therefore, has not revised its prediction on the full 2012 vehicle sales from its May figure of 2.85 million units.

 The January-October 2012 production volume increased to 1.84 million units, up 12.6% y/y. According to the November forecasts by ASM Holding, which announces production volume figures, the 2012 full-year production should total 2.22 million units, consisting of 1.96 million passenger cars and 260,000 commercial vehicles.

Vehicle production and sales volume in Russia

(units)
2008 2009 2010 2011 Jan.-Oct.
2011
Jan.-Oct.
2012
2012
(Forecast)
Production of vehicles 1,802,823 724,190 1,406,643 1,994,254 1,631,864 1,837,000 2,220,391
Production of passenger cars 1,468,579 595,807 1,208,362 1,738,163 1,423,956 1,621,600 1,960,094
Production of commercial vehicles 334,244 128,383 198,281 256,091 207,908 215,400 260,297
Sales volume of vehicles 2,928,054 1,465,925 1,912,794 2,653,408 2,162,720 2,441,663 2,850,000

Source: ASM Holding, Association of European Businesses (AEB) and others
Note 1. Sales volumes from 2010 do not include heavy-duty trucks.
Note 2. 2012 production forecasts are based on the ASM Holding's report announced in November 2012; 2012 sales forecast is based on the AEB's report announced in May (the same sales forecast in the November report).

 

 



Russia: Effects of WTO accession/Introduction of vehicle recycling tax

Russia: Effects of its formal WTO accession on automotive industry

Lowered import tariffs  Russia became a full member of the WTO in August 2012, which should lower import tariffs on new passenger cars from current 30% to 25% and gradually to 15-12.5% by 2019. The import tariffs on used cars should go down from 35-70% to 25% in the beginning and to 20% by 2019.
Removal of reduced rates and exemption to components  The new "industrial assembly rules," approved by the Russian Government in 2011, exempt foreign OEMs and parts suppliers in Russia from import tariffs on automobile components under certain conditions including raising local content ratios. As the rules conflict with the WTO agreements, they should be abolished by the end of June 2018. The OEMs that had signed the agreement on the 2011 new rules with the Russian government should pay regular tariffs from July 2018.
 The "industrial assembly rules" have required the following of foreign OEMs: to set up new facilities with at least 300,000 units annual production capacity, or 350,000 units in case of utilizing existing facilities; to produce engines and gearboxes; to set up an R&D center; and to achieve 60% local content ratio. Those that signed the agreement should have enjoyed 0-5% import tariffs on components, reduced from regular 5-20%, for the eight years through 2020. The participants include the five OEMs group of AvtoVAZ-Renault-Nissan-Kamaz-Daimler, Ford-Sollers, VW-GAZ and GM.

Russia: Introduction of vehicle recycling tax

Introduction of recycling tax  The Russian government introduced a recycling tax on new and used cars and started collection on September 1, 2012. The tax is charged as the scrapping cost on the locally- produced and imported vehicles, including four- or more-wheeled passenger cars, trucks and buses. Since the tax rates are set higher on imports and used cars, it is regarded as a measure to protect the domestic auto industry after Russia's entry to the WTO, which should lower tariffs on vehicles.
Tax amount  The tax amount is calculated based on the standard tax multiplied by coefficients. The passenger car recycling tax varies depending on the age of service and the engine displacement. In case of vehicles imported by corporations, new cars will be charged 17,200 to 110,000 rubles and used cars will be charged 106,000 to 700,200 rubles. Trucks will be charged depending on the age of service and the gross vehicle weight: new trucks imported by corporations will be charged 75,000 to 435,000 rubles and such used trucks will be charged 132,000 to 1.77 million rubles.
Exemption from the recycling tax  Based on the exemption provision, this tax will not be imposed on vehicles "manufactured by organizations obliged to assure safe handling of the scraps." Specifically, they should be "corporations registered in the Russian Federation," "manufacturing transportation equipment under the scheme of the 'industrial assembly rules,'" and should meet some other requirements. While most of exempted OEMs are Russian, some Japanese OEMs including Nissan, Toyota and Mitsubishi-PSA are also excused. (As of September 2012)

Sources: JETRO reports; Impact of Russia's accession to the WTO on tariffs and regulations, August 2012; World business news, September 18, 2012 (both in Japanese)
Note: 1 ruble=approx. 2.66 yen as of late November 2012

 

 



Production facilities of major OEMs in Russia

Russia: production facilities of major OEMs

Assembly plant Annual
production
capacity
(1,000 units)
Production
AvtoVAZ
(Renault-Nissan)
Togliatti
(Samara Region)
1,000→1,200
(2016)
Lada Largus, Granta, Classic,
Samara, Kalina;
Nissan Almera;
(Summer 2013-) Renault Logan
GM-AvtoVAZ Togliatti
(Samara Region)
70→120
(2015)
Chevrolet Niva, Viva, Tahoe, Epica, Lacetti;
Cadillac CTS, STS, SRX; Lada 4x4 (planned)
(To start building a new plant in Spring 2013
and operations at the end of 2015)
IzhAvto Izhevsk
(Udmurt Republic)
120→300
(2016)
Lada brand vehicles
(Renault/Nissan brand vehicles to be produced)
GAZ Nizhny Novgorod
(Nizhny Novgorod Region)
250 Chevrolet Aveo
(End of 2012-) VW Jetta; Skoda Octavia, Yeti
(2013-) Mercedes-Benz Sprinter T1N
Ford-Sollers Yelabuga
(Tatarstan Republic)
75 (Sollers' existing plant)
Ford Explorer, Kuga, S-Max, Galaxy, Transit
Naberezhniye Chelny
(Tatarstan Republic)
- (Sollers' existing plant) Under renovation:
painting and welding facilities to be added
Vsevolozhsk
(St. Petersburg City)
125 (Ford's existing plant)
Ford Focus, Mondeo
Sollers-Bussan Vladivostok
(Far East)
0→12
(End of 2012)
(JV with Mitsui & Co., Ltd. to start
production at the end of 2012)
Toyota Land Cruiser Prado
Mazda Sollers
Manufacturing Rus
Vladivostok
(Far East)
50→100
(to be determined)
Mazda CX-5, (2013-) Mazda6,
(Sollers brand vehicles to be produced)
UAZ
(Sollers' subsidiary)
Ulyanovsk
(Samara Region)
120 (Sollers-Isuzu transferred production in June 2012)
Isuzu N-Series (Elf); UAZ brand vehicles
KAMAZ Inc. Naberezhniye Chelny
(Tatarstan Republic)
66 Kamaz, M-Benz, Fuso trucks
Avtotor Kaliningrad
(Kaliningrad Region)
300→350
(2014)
Kia, Hyundai, BMW, Chevrolet, Cadillac,
and Opel brand vehicles
TagAZ Taganrog
(Rostov Region)
180 Hyundai, TagAZ, and BYD brand vehicles
General Motors
Avto
Susary
(St. Petersburg City)
98→230
(2015)
Opel Antara, Astra; Chevrolet Captiva, Cruze
Volkswagen Rus Kaluga
(Kaluga Region)
165 VW Tiguan, Polo; Skoda Fabia, Octavia
(To relaunch Audi car production in mid-2013)
Fiat St. Petersburg 0→120
(2014)
(Sberbank to finance the project;
production to start in 2014)
Vehicles based on Jeep models
Volvo Trucks Russia Kaluga
(Kaluga Region)
15 Volvo trucks, Renault trucks, chassis
(To start production of cabs for
Volvo and Renault trucks in 2014)
Avtoframos
(Renault's subsidiary)
Moscow 175 Renault Logan, Sandero, Duster, Megane,
Fluence, Koleos, Latitude
Peugeot-Citroen
Mitsubishi
Automotive Rus
Kaluga
(Kaluga Region)
125 (CKD production started in 2012)
Peugeot 408, Mitsubishi Outlander,
(2013-) Citroen C4 L, Mitsubishi Pajero Sport
Nissan
Manufacturing Rus
Kamenka
(St. Petersburg City)
50→100
(2014)
Nissan Teana, X-Trail, Murano,
(2014-) next generation Qashqai
Toyota Motor
Manufacturing
Russia
Susary
(St. Petersburg City)
50 Toyota Camry
Hyundai Motor
Manufacturing Rus
Kamenka
(St. Petersburg City)
200 Hyundai Solaris; Kia Rio

 

 



Renault-Nissan: To acquire a majority stake in AvtoVAZ and strengthen partnership

Plans of Renault-Nissan-AvtoVAZ

Mid-term plan  The 2011 sales of Renault, Nissan and AvtoVAZ in Russia totaled 879,000 units and their combined market share reached 33.1%. (AvtoVAZ: 21.8%, Nissan: 5.5% and Renault: 5.8%) The three partners aim to raise the share to 40% and the combined production capacity to 1.6 million units per year by 2016.
Renault-Nissan to get a majority stake in AvtoVAZ  The Renault-Nissan Alliance and state investment corporation Russian Technologies agreed in May 2012 to create a JV for acquisition and control of a majority stake in AvtoVAZ.
 The Renault-Nissan alliance plans to invest approx. USD750 million (Renault: USD300 million, Nissan: USD450 million) in order to acquire 67.13% of the JV by 2014. Meanwhile the JV will hold 74.5% of AVTOVAZ by 2014. The transactions will give the alliance 50.01% stake in AvtoVAZ indirectly. (Renault already purchased 25% of AvtoVAZ in 2008.)
Expansion of AvtoVAZ Togliatti plant  The Renault-Nissan and AvtoVAZ partnership made EUR400 million investment in the AvtoVAZ plant in Togliatti to install a new production line for 350,000 cars/year and started operations in April 2012. Nissan and AvtoVAZ invested 25% each, while Renault invested 50%. This is the sixth production line at the Togliatti plant, which has expanded the total plant capacity to approx. one million units/year.
 Production started with two AvtoVAZ Lada models including Lada Largus, followed by the Nissan Almera in November 2012 and two Renaults in 2013. Nissan's Datsun brand models will also be produced in the future.
Jointly developed Lada Largus  The Lada Largus, which AvtoVAZ started to produce in April 2012, is the first model jointly developed by the three partners. It is an MPV available with two, five and seven seat versions, using the same Renault-Nissan B0 platform as the Dacia Logan.

Nissan's independent plans

Mid-term plan  By 2016 Nissan plans to triple sales in Russia from 161,000 units in 2011 and to raise its market share to 10%. It also plans to manufacture locally up to 80% of Nissan's sales within Russia by 2015.
St. Petersburg plant to increase capacity  Nissan will invest EUR167 million to add 50,000 square meters of production facilities, including Press and Plastic Shops, at the St. Petersburg plant. It will double the annual production capacity to 100,000 units in FY 2014, announced in May 2012. The expansion will enable the plant to produce up to five different models simultaneously. Nissan will build the next generation Qashqai.
To launch the Almera, exclusive to Russian market  The all-new Almera 4-door, 5-seater sedan has been developed specifically for the Russian market. The ground clearance is extended to 160 mm and the bottom of the engine bay is covered by a steel plate against poor road surfaces. Manufactured at AvtoVAZ Togliatti plant, the Almera will be released in early 2013. Although the price has not been revealed, it is expected to be reasonable.

 

 



Russian carmaker Avtotor: To build auto cluster in Western Russia with Magna

Avtotor and Magna: To build auto cluster in Kaliningrad

 Russian carmaker of foreign-brand cars Avtotor and Canadian supplier Magna signed an agreement to establish an automotive manufacturing cluster of total annual capacity of 250,000 cars in Kaliningrad region, Western Russia. The plans, including up to six car factories and 15 parts facilities, will be implemented in several phases and completed in 2018. The auto cluster will comprise plants of Avtotor's current partners, BMW, GM, Kia and others.

 

 



U.S. and European OEMs in Russia (GM/Ford/VW/Fiat)

GM: To boost capacity at both independent and JV plants to combined total of 350,000 units

To expand St. Petersburg plant  GM plans to expand its own St. Petersburg plant to raise capacity from current 98,000 units to 230,000 units/year by 2015, announced in June 2012. The employees will be increased to 4,000 from current 2,500. The all-new Opel Astra sedan, exhibited at the Moscow Auto Show in August 2012, will also be manufactured at the plant.
New facilities to be added to JV with AvtoVAZ  GM has decided to increase capacity also at its fifty-fifty JV, GM-AvtoVAZ, from current 70,000 units to 120,000 units per year, reported in September 2012. In the spring of 2013, construction of an autobody facility, a press facility, an R&D center and a distribution center will start at the Togliatti Special Economic Zone in Samara Region, which is close to its existing plant. The investment will total approx. 6.2 billion rubles. Operations will commence at the end of 2015 to output the next generation Chevrolet NIVA.
 GM plans to invest a total of USD1 billion in Russia over the next five years from 2012. Production capacity increases at the above mentioned two plants will raise GM's annual capacity in Russia to 350,000 units.

 

Ford: Additional five Ford models manufactured locally at its JV with Sollers

 Fifty-fifty JV Ford Sollers started operations in October 2011. While the Ford had already produced the Focus and the Mondeo at its Vsevolozhsk plant, Sollers' Yelabuga plant in the Republic of Tatarstan started to produce Ford models in 2012: the Transit commercial vehicle in January, and the Kuga/Explorer SUVs and the S-Max/Galaxy MPVs in July. More than 95% of Ford's vehicles sold in Russia are now locally manufactured.

 

VW Group: Building new engine plant in Kaluga. To relaunch Audi car production in Russia

Mid-term sales target  VW aims to sell 500,000 vehicles/year in Russia by 2018. Its 2011 sales were approx. 230,000 units. While it has already invested approx. EUR1 billion in the Russian market, it will invest another EUR1 billion to increase local production and launch new models in order to hit the target.
New engine plant construction  VW announced in August 2012 that it will construct an engine plant with approx. EUR250 million as part of its investment plan. At the new 150,000 engines/year plant that is being built next to its vehicle plant in Kaluga, Western Russia, it will manufacture crankcases, cylinder heads and crankshafts, and assemble engines. It will supply engines to the Kaluga vehicle plant and to the GAZ plant in Nizhny Novgorod, which produces VW cars on contract.
To relaunch Audi car production  With the emerging affluent population, demands for luxury cars are expanding in Russia. Audi therefore revealed in September 2012 its plan to relaunch production in Russia in mid 2013. It is likely to manufacture the A4 and A6 passenger cars as well as the Q5 and Q7 SUVs at its parent company VW's Kaluga plant. Production of Audi cars had been halted at the plant since 2010, when CKD assembly replaced SKD assembly at the plant.

 

Fiat: Agrees with Sberbank on Jeep production and sales in Russia

 After the alliance talks with Sollers failed, Fiat signed an agreement in February 2012 with Russia's largest state bank Sberbank on a project to build and sell Jeep brand vehicles in Russia. Sberbank plans to finance the project and take a stake of up to 20% in their JV. The JV will build Jeep-based SUVs mainly and other models including LCVs at the 120,000 units/year plant to be built in St. Petersburg. It will start operations in 2014. The JV will also contract out vehicle production to Russian truck manufacturer ZIL's plant in Moscow. The total investment is valued at EUR850 million.

 

 



Japanese OEMs in Russia : Toyota/Mazda/Mitsubishi

Toyota: To increase production at St. Petersburg plant. Assembly at Vladivostok put off to 2012 yearend

To add production processes to Russian plant  Toyota announced in February 2012 that it will add stamping and resin-molding processes to its St. Petersburg plant. The new processes are to be added to current welding, painting and assembly processes to further promote localization in the Russian market that promises continued sustained growth. Scheduled to start operations in 2014, the additional processes are to be built with approx. 2.75 billion rubles in total.
To add second shift at Russian plant  Toyota started two-shift operations at St. Petersburg plant in September 2012, supported by favorable sales of the plant's product, the Camry. With approx. 600 new personnel hired for the two-shift operations, the employees increased to approx. 1,750 in total. The production volume/year is likely to be doubled from approx. 20,000 units in 2011.
Postponed production at Vladivostok  Toyota will assemble KD kits of the Land Cruiser Prado SUV at the JV plant under construction jointly by Sollers, the leading Russian OEM, and Japan's Mitsui & Co. at Vladivostok. The assembly was originally scheduled to begin in the spring of 2012, which has been suspended to 2012 yearend due to the delay in construction. The production volume will be approx. 1,000 units/month.

 

Mazda: Assembles the CX-5 and the Mazda6 at JV with Sollers

Annual sales target: 100,000 units  Mazda sold approx. 40,000 units in Russia in 2011. It aims for 50,000 units in 2012 and to double it to the 100,000-unit level in 2016.
JV with Sollers started production  Mazda and Sollers opened Mazda Sollers Manufacturing Rus, a fifty-fifty JV in Vladivostok in Russia's Far Eastern Federal District, in September 2012. The total investment is 10 billion rubles. In October, operations started only with a vehicle assembly line, which provides the CX-5 SUV and the all-new Mazda6, called the Atenza in Japan. The initial production capacity is approx. 50,000 units/year, which Mazda aims to increase to the 100,000-unit level in the future with additional autobody production and painting shops.

 

Mitsubishi and PSA: Begins CKD assembly at JV Kaluga plant

 Mitsubishi and PSA JV "PCMA Rus" started CKD production at its Kaluga plant in July 2012. The plant is 70% owned by PSA and 30% by Mitsubishi. While it had assembled SKD kits including the Peugeot 308 and the Mitsubishi Outlander since April 2010, it started CKD assembly of the Peugeot 408 in July 2012 and Mitsubishi's all-new Outlander SUV in November. The PSA Citroen C4L and the Mitsubishi Pajero Sport will follow these in 2013. The JV aims to raise the local content ratio to over 30% in 2014 from 10% as of July 2012.

 

 



Commercial vehicle manufacturers in Russia: Volvo/Daimler

Volvo Group:To start producing cabs of Volvo/Renault Trucks brands

 The Volvo Group will invest SEK783 million (approx. USD120 million) in its Kaluga plant to start production of cabs under the Volvo and Renault Trucks brands in 2014, announced in September 2012. The total cab capacity will be 15,000 units/year. While the plant has produced trucks from January 2009 with a total annual capacity of 15,000 units, it is importing cabs from Sweden at present. According to the Group, the Russian market for the Western premium heavy trucks is to expand to 28,000 units in the full 2012, which is twice as large as the 2010 result, and further expansion is predicted.

 

Daimler: To supply cabs to Kamaz and produce commercial vans with GAZ Group

To supply heavy-duty truck cabs to Kamaz  In June 2012, Daimler signed a contract with Russian truck manufacturer Kamaz on the supply of Mercedes-Benz heavy-duty Axor cabs. The cabs will be incorporated into the new Kamaz truck generation, to be launched in the Russian market in 2013. Kamaz plans to sell over 20,000 units of the model over the long term. It plans to double its production volume to 100,000 units in 2020 compared to 2012. Daimler holds 15% of shares in Kamaz.
To produce commercial vans with GAZ  Daimler and Russian commercial vehicle manufacturer GAZ Group started in June 2012 implementation of Mercedes-Benz Sprinter T1N van manufacturing in Russia. The van's production at GAZ's Nizhny Novgorod plant is scheduled to start in the first half of 2013. Daimler is investing EUR100 million and GAZ is investing EUR90 million in the project. The partners had agreed on the joint production in December 2010.

 

 



(Reference) 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)

(units)
2009 2010 2011 Jan.-Oct.
2011
Jan.-Oct.
2012
AvtoVAZ 349,490 522,924 578,387 493,187 449,164
GAZ 58,205 76,647 89,773 73,176 72,576
UAZ 34,660 49,043 57,148 44,452 48,151
Tagaz 5,187 7,284 1,840 1,323 1,268
Russian OEMs 447,542 650,120 727,148 612,138 571,159
Toyota 75,128 90,296 133,203 106,229 142,585
Honda 23,222 18,159 19,101 15,735 17,713
Nissan 68,851 84,288 145,869 113,019 138,986
Mazda 30,643 24,926 39,718 31,930 38,831
Mitsubishi 41,354 45,538 74,166 58,841 59,872
Suzuki 25,335 28,690 35,469 29,650 27,951
Subaru 9,598 8,552 12,371 10,163 11,686
Isuzu 86 330 371 368 143
Japanese OEMs 274,217 300,779 460,268 365,935 437,767
GM 141,695 158,567 243,265 198,963 242,045
Ford 88,977 100,816 118,031 93,676 105,517
Chrysler 1,203 1,261 2,327 1,705 4,255
US OEMs 231,875 260,644 363,623 294,344 351,817
VW 94,018 131,312 228,799 178,602 260,985
Renault 72,284 96,466 154,734 125,327 155,433
PSA 42,136 53,153 71,944 58,866 65,875
Fiat 18,830 21,943 28,254 23,943 6,984
Daimler 13,435 21,847 31,761 25,909 33,412
BMW 17,036 21,585 30,167 24,058 32,247
Jaguar/Land Rover 10,208 10,828 14,365 11,046 16,983
Porsche 1,264 1,572 2,202 1,894 3,028
European OEMs 269,211 358,706 562,226 449,645 574,947
Kia 70,088 104,235 152,873 127,081 157,519
Hyundai 74,607 87,081 163,447 129,698 146,739
Daewoo 51,414 74,419 92,778 79,479 73,589
Ssangyong 9,020 12,526 22,692 17,243 25,591
Korean OEMs 205,129 278,261 431,790 353,501 403,438
Chery 10,844 8,909 7,278 5,456 16,191
BYD 1,001 574 2,007 1,482 2,282
Lifan 2,673 7,700 17,910 14,480 16,887
Great Wall 2,490 3,637 6,777 5,172 10,849
Geely 7,681 1,944 25,269 18,234 30,378
Chinese OEMs 24,689 22,764 59,241 44,824 76,587
Other OEMs 13,257 41,520 49,112 42,333 25,948
Total 1,465,917 1,912,794 2,653,408 2,162,720 2,441,663

Source: Association of European Businesses (AEB)              
(Note) The Ford's volumes up to 2010 include those of Volvo. As Geely, China acquired Volvo in August 2010, the Volvo's volumes after 2011 are included in the Geely's.


Source: OEMs' press releases and various media reports

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