Asian Car Makers Tap Into Russia's Growing Wealth

[JoeT]

Asian Car Makers Tap Into Russia's Growing Wealth

Andrew Kramer & James Brooke 15/10/05
www.smh.com.au

Three years ago Hyundai's sales in Russia were as modest as its cars. Who among the new class of super rich would buy a low-profile Hyundai? And who among the poor could afford one?

With revenues from Russia's oil exports pulsing through the economy, Hyundai's fortunes have changed profoundly.

Its cars are selling well from a new, national dealer network. Hyundai, barely known here a few years ago, sold 8994 cars in August - a nearly 100-fold increase from the 91 cars it sold in January 2002.

And it leads a pack of Asian car makers which are aggressively moving into Russia, believing the country will be one of the world's big growth markets within decades. "This market is growing very quickly," said Jean-Francois Tremblay, an automotive analyst with Ernst & Young. "That creates pressure. Top executives feel they need to position themselves properly here or they will need to answer for it."

With oil money fattening the wallets of Russian car buyers, purchases of imported cars rose 64 per cent to 348,459 in the first eight months of this year. By the end of the year, foreign brands could account for one-third of car purchases in Russia, up from 5 per cent in 2000.

Overall car sales this year were expected to pass 1.8 million, making Russia one of the three fastest-growing major car markets in Europe along with Poland and Turkey, Mr Tremblay said.

Of the 10 most favoured foreign brands, four are Japanese, three are Korean, one is French and two - Ford and Chevrolet - are American. In sales, Hyundai has taken the lead in market share, recording a 115 per cent growth through August this year. For 2005, Hyundai may hit the 100,000-car sales mark, a fruitful result, after it started assembling its Accent and Sonata sedans in Russia in 2001.

Hyundai spokesman Jake Jang said his company saw Russia as an "exploding market. It is a market with a great potential, just like China, like India".

In St Petersburg, Toyota is building Japan's first car manufacturing plant in Russia. When it opens in December 2007, the $US140 million ($186 million) plant will be able to produce 50,000 Camry sedans a year.

Russian sales for Toyota, Japan's largest car maker and the second most popular brand in Russia, jumped 53 per cent in the first eight months of this year. Its 2005 sales seem to be on track to hit 65,000 cars.

Toyota's chairman, Hiroshi Okuda, said in June that the company aimed to expand production eventually to 200,000 cars a year, using St Petersburg as a hub for exports.

American and European car makers are also moving into Russia. Ford Motor will double output of Focus sedans to 60,000 a year at its $US150 million plant, also outside St Petersburg. Sales were limited now by a six-month waiting list for Focus cars, said Henrik Nenzen, president of Ford's Russia subsidiary.

Two German car makers, Mercedes and Volkswagen, are in talks about opening assembly plants in 2006.

Foreign car companies are betting that incomes here will continue to climb, driven by high world prices for oil, a major Russian export. The average income already rose to $US244 in 2004, from $US79 a month in 2000, according to the State Statistics Committee. Income is projected to increase 11 per cent this year and 12 per cent in 2006.

Certainly, vast amounts of oil wealth have accumulated in the accounts of a few wealthy Russians. That is reflected in the automotive market by the gleaming Moscow showrooms for Bentley, Ferrari and Maserati cars. But Hyundai's success shows that some wealth is seeping down as well. Hyundai's Accent sells for about $US10,000 in Russia.

"If nothing else, the rich will have to be taken care of. We will sell cars to the people who take care of the rich," said Vitaly Rustanovich, regional sales manager for Carnet-2000, a Hyundai distributor.

Most foreign companies concentrate their efforts on Russia's populated western half, effectively conceding the eastern half to second-hand cars from Japan that are easily recognisable by their right-hand-drive steering wheels. In Russia's east, an estimated 1.5 million right-hand-drive cars are on the road.

In Sakhalin, an oil- and gas-rich island only 40 kilometres north of Japan, 93 per cent of 800 drivers polled by Sakh.com, a news website, said they used right-hand-drive cars. Monthly imports of used Japanese cars were up by one-third to 10,300 in the first half of this year, according to customs officials in Vladivostok.

Car makers are pushing for an outright ban on the right-hand-drive cars, citing safety reasons, and to encourage the manufacture of new cars in Russia, but drivers in Vladivostok have started a regional freedom of choice movement.

On May 19, drivers across the Russian Far East protested by blaring horns and brandishing placards reading: "No to taxes and bans" and "Our cause is right, our wheel is right".

But as incomes rise, Shigeo Natsui, Japan's consul in Sakhalin, said he believed that Russians would soon have the earning power to buy new vehicles from Japan.

"The wages are increasing," he said. "Some families have two cars. It is quite possible that a new market will evolve."

[GM_Fanatic]

Wheres GM? I know they have stuff in Russia.

[Wezzeles]

there are people with out cars?

also more importantly, how cool would it be to drive cadillacs in russia.

[TransAmTrance]

i can hear the russian accent now-> cah-del-ackh

[Gm786]

Why aren't they mentioning GM?

[tgagneguam]

They gave GM a brief mention:

Of the 10 most favoured foreign brands, four are Japanese, three are Korean, one is French and two - Ford and Chevrolet - are American.

[rudbwoy69camaro]

Originally Posted by TransAmTrance

i can hear the russian accent now-> cah-del-ackh

LOL I love Russians!

[DanCBJMS1988]

GM's presence in Russia is well-represented. I know Dmitri can provide a better explanation than me, but here are a few websites:

http://www.generalmotors.ru/ - portal for GM in Russia

http://www.chevrolet.ru/ - website for Chevy in Russia, as you can see they offer some of the typical GMDAT (Asian)-based Chevys found elsewhere in Europe, as well as the Kroymans-imported Tahoe and TrailBlazer

http://www.gm-avtovaz.ru/ - this is a joint venture set up a while back between GM and AvtoVAZ/Lada (the most popular domestic automaker in Russia) in Tolgiatti, financed by the EU; the vehicles offered are the Chevy Niva (basically a refreshed Lada Niva) and the Chevy Viva (basically a previous-generation Astra)

http://www.opel.ru/ - your typical Euro Opel retailer

http://www.cadillac.ru/ - your typical Euro Cadillac retailer

http://www.saab.com/main/RU/ru/index_flash.shtml - your typical Saab retailer

http://www.hummer-cars.ru/ - your typical Euro AM General/Hummer retailer

Of these, as the article mentions, Chevrolet is one out of two popular American marques in Russia.

[vxl]

There had been suggestions early in the GM-Autovaz tie-up that the Niva would be exported to Western Europe as a low-cost 4x4.

[DanCBJMS1988]

GM-AvtoVAZ tried that already. Not going to happen.

Read:

GM Big In Russia
UK: Chevy’s new model explosion
(Emphasis on http://www.gminsidenews.com/forums/s...457#post290457 and http://www.gminsidenews.com/forums/s...288#post291288 )
http://www.gminsidenews.com/forums/s...821#post253821

[BlackCadillac]

There are two sets of Chevrolets? The Korean models and the Astra/Niva models? I guess the Tahoe/Trailblazer are a third set. Do they all sell thru different dealer networks?

[DanCBJMS1988]

Think of it this way:

In Europe, there are three dealer networks. You've the Chevrolet Europe (née Daewoo) network, the Corvette network, and the old Chevy Europe (Tahoe and TrailBlazer) network, which also used to carry the Alero, the Trans Sport, and other Europeanized US Chevys.

Now, I don't think that the Corvette would be sold in Russia, and the new and old Chevy-Europe networks are technically one network. The Niva/Viva are not sold through Chevy dealers, they are sold through "GM-AvtoVAZ" dealers.

[Jay]

Originally Posted by DanCBJMS1988

GM's presence in Russia is well-represented. I know Dmitri can provide a better explanation than me, but here are a few websites:

http://www.generalmotors.ru/ - portal for GM in Russia

http://www.chevrolet.ru/ - website for Chevy in Russia, as you can see they offer some of the typical GMDAT (Asian)-based Chevys found elsewhere in Europe, as well as the Kroymans-imported Tahoe and TrailBlazer

http://www.gm-avtovaz.ru/ - this is a joint venture set up a while back between GM and AvtoVAZ/Lada (the most popular domestic automaker in Russia) in Tolgiatti, financed by the EU; the vehicles offered are the Chevy Niva (basically a refreshed Lada Niva) and the Chevy Viva (basically a previous-generation Astra)

http://www.opel.ru/ - your typical Euro Opel retailer

http://www.cadillac.ru/ - your typical Euro Cadillac retailer

http://www.saab.com/main/RU/ru/index_flash.shtml - your typical Saab retailer

http://www.hummer-cars.ru/ - your typical Euro AM General/Hummer retailer

Of these, as the article mentions, Chevrolet is one out of two popular American marques in Russia.

Too weird!
How very funny too see 4WD described in funky Russian letters.

[genjy]

Originally Posted by Wezzeles

there are people with out cars?

also more importantly, how cool would it be to drive cadillacs in russia.

I don't think Cadillac could touch Mercedes in Russia. Mercedes is pretty much the traditional luxury car brand everywhere in the world. Caddy would have to pull off some Jedi mind tricks to play with Mercedes outside of the U.S.

[lilredcrvtt]

Here they go again. The media playing up how great these crafty asians are, look at them taking advantage of these Russians. G.M. has been building and selling in Russia for quite sometime. Where there is an opportunity for growth, there will be heavy competition. And, by the way Mercedes quality, while still good, is not what it used to be. No need for mind tricks Jedi or otherwise, things change.