Vladimir Shlyomin

The automotive industry, which remains a major sector of the national economy and one of the leading metal consumers, is adjusting itself to market economy conditions with great difficulties. So far motorcar manufacturers survived thanks to high custom duties on foreign-made cars and low purchasing power of the population. The Concept, which has been reviewed by the RF government, assumes creating qualitatively new conditions for setting up a modern production of motorcars.

    Commenting on the new ideology of the industry’s development RF minister of industry, science and technologies Ilya Klebanov cited the following data: «In 2001 Russia manufactured 1.25 mln motorcars. That is to say that our share of the world production accounts for 2.3 %. Still, Russian motorcar plants are maintaining certain niches on markets. Above all, this is the case with passenger cars costing up to $6.000, trucks and buses with prices of up to $ 20.000. They are being successfully sold not only in Russia and the CIS member-states but also in a number of other countries. Export shipments of Russian motorcars accounted for about 11% of their total production volume».
And here is how matters stand now on the Russian market. The lower part of the price scale (from $2.000 to $7.400) is filled with Russian motorcars. Those costing from $5.000 to $6.000 account for the biggest share of the sales volume. New imported motorcars usually cost between $12.000 and $20.000. Used foreign cars, mainly from Europe and Japan, are in the middle of the price scale. Today exactly these very cars are considered leading rivals of the national automotive industry.
Even more serious problems are awaiting Russia in the next 15 to 20 years. According to analysts’ predictions, as living standards of the population rise, the average price of purchasing a passenger car will grow to between $7.000 and $10.000. Against this background products of Russia’s automotive industry will directly confront rivaling new foreign motorcars. But we are not ready yet for such a competition.
We have to admit that during years of reforms automobile plants and manufacturers of completing parts did very little to modernize their capacities. Technologies, which are still being applied in this industry, are based on «the day-before-yesterday» processes, equipment and materials. The wear extent of the industry’s active production assets equals 60 % and the medium age of technological equipment amounts to 18 years.
Describing the level of investment activity in the industry the minister noted that the annual volume of investments from 1998 through 2001 averaged $280 mln. What is more, investments were made mainly by automobile plants themselves: their share equaled between 80% and 94%. The acute deficit of credits prevented implementation of projects to modernize enterprises.
Large foreign companies have a different structure of investments: about 80% of them are credits and borrowings.
At present, world motorcar leaders are already operating in Russia. They are Ford Motor (in 2001 the company will start production in the Leningradskaya region), Renault (it will set up production in Moscow), General Motors (the firm is in the process of preparation to start production at AutoVAZ). Besides, there are capacities created to make Daewoo, Hundai, Citroen, �IA and BMW motocars. The negotiations are going on with Fiat on arranging production in Nizhny Novgorod. Volkswagen is studying a possibility to manufacture motorcars in the Moscow region.
The scientific and technological potential of these companies stimulates our interest in having them operate in Russia. However, volumes and rates of investment inflows from foreign firms, which possess modern technologies, are still unsatisfactory.
So, why Russia does not provide foreign manufacturers with full freedom of operation? The matter is that we do not intend to hand over our market completely to foreign companies, for social reasons in particular. Over 800.000 people are employed in the automotive industry today. Taking into account its far-flung connections to other industries it is no wonder that up to 10% of the country’s able-bodied population depend on jobs at automobile plants. That is why the RF government believes that only joint operations on this market are warranted.
The Russian automotive industry is going through the process of consolidating assets. Powerful industrial groups are being formed. These processes correspond to the world trend of capital concentration aimed, first of all, at reducing costs of car manufacturing. It is noteworthy that companies are making considerable efforts to raise quality, improve management of enterprises. Business plans are directed at increasing production volumes and manufacturing new brands of motorcars. In particular, there are preparations underway for making modern modifications of motorcars at AutoVAZ, KamAz, Ulyanovsky, Uralsky and other plants.
The Concept of developing Russia’s automotive industry supports exactly this kind of activities. The realization of this concept assumes three main directions:
– developing and reforming existing enterprises on the basis of science-grounded technologies;
– setting up new capacities to manufacture motorcars with participation of foreign investors;
– creating an industry to manufacture automobile components of world standards.
Cooperation with foreign companies does not assume developing «just a screwdriver» production. The localization of manufacturing is a very important factor. In 7 to10 years its level should reach from 80% to 85%. It means that assembling motorcars will be done, mainly, with materials and completing parts made in Russia. And this is badly needed by related industries, above all, by the metallurgy and metalworking ones.
The minister reminded of a recent action by the U.S. United Auto Workers Union. American citizens were called upon to refuse buying motorcars made in Europe and Asia. «You did it here, you buy it here!». That was basically the slogan of this action. As we might see, protection of the national manufacturer is becoming a major problem even for such a country with historically developed automotive industry, as the U.S. We hope that we can settle this problem faster.