Vladimir Shlyomin

T

hese indicators seem to refute the already conventional skepticism with respect to the potential of the Russian automotive industry. It is well known that a lot of experts as well as customers believe that the industry is only capable of manufacturing outdated models and raising their prices.


As soon as the Russian military gradually started its rearming program, carmakers quickly sensed the need for a new command motor vehicle and got set for signing contracts.
They were not mistaken: the Ministry of Defense announced its intent to purchase the Russian Tiger GAZ-2975 model (see EM, No.3, 2003). As the choice was made, other power structures along with entrepreneurs and CEOs from major companies showed their interest in it as well. The GAZ Plant that makes Tiger has already received hundreds of orders. The car has been in demand by anti-terrorism units, SWAT teams, the companies Gazprom, LUKOIL, YUKOS and even the head of the popular Korkunov confectionery, among others. There is a waiting list since the plant’s production capacities are sufficient for manufacturing no more than just a thousand Tigers a year.
General Motors, which is getting ready to make its Hummer model in Russia, has even got confused by the unexpected rivalry: the manufacturing of the American all-country vehicle has been twice postponed for a latter date. With a starting price being as much as nearly one third lower than the price for the GM model, Tiger is ahead of Hummer by a number of the most important parameters. Its 5.9 liter engine power amounts to 225 hp (against Hummer’s 195 hp) and, besides, there are four more options of engines that can be installed and aggregated, at one’s choice, into either a mechanical or automatic transmission box. Tiger’s maximum speed is 140 km an hour, it accommodates up to 10 persons depending on its modification and has a 1.5 ton carrying capacity. The vehicle withstands tilting up to 30 degrees and can get over 45-degree slopes as well as 1.5 m deep water barriers.
In addition to the standard model, there is a GAZ-29751 armored option. Developers of this type insist that it easily endures even an explosion when running over an antipersonnel mine: passengers will just feel its body’s shaking but will escape any harm while any other not-specially-designed all-country vehicle will turn upside down.
Truck manufactures’ business is not bad either. In the last two years a whole series of up-to-date technologies to make units and components has been introduced at GAZ. The manufacturing of the popular restyled models of minibuses, vans and light-duty trucks of the GAZel and Sobol types (new rear sections, modern lighting, wider color spectrum) has been started. On this base the plant is making all-wheel drive vehicles, including those being designed for special purposes: in 2003 it manufactured over 10,000 of them. GAZ has overcome the chronic unprofitableness and today its annual profit amounts to hundreds of million of dollars.
Another carmaker, the KAMAZ Plant, has also found its market niche. The plant’s persistent efforts to expand exports are particularly remarkable. After KAMAZ has begun installing the Euro-3 safety class engine, the plant has immediately restored its presence in markets of Eastern Europe. Making modifications of automobiles on customers’ terms, namely, manufacturing dump trucks with right-sided steering wheels, has let KAMAZ enter India’s market.
Yet, isolated achievements in some market sectors, of course, do not mean that Russian carmakers are capable of competing with world leaders. Russia was and has been a comparatively narrow market: while there are groups of rich and superrich owners of the most prestigious cars, the bulk of potential buyers possesses means that are rather modest for purchasing an automobile. Precisely because of it AvtoVAZ still keeps making models, which the plant has started manufacturing twenty five years ago. Also for this reason, bringing and reselling old foreign cars in Russia are a thriving extensive business for a large number of people.
However, there are some qualitative changes already underway in the passenger car sector of the market. If in 2002 imported cars accounted for up to 70% of the Russian market’s volume, today the trend is different. According to statistics, there were 1.011 million cars manufactured in Russia in 2003 but the import shipments of automobiles was three times less. A considerable increase of customs duties, especially, on importing cars older than 7 years, had, of course, its impact. But that is not the only point. The matter is that an ever growing number of foreign models is now assembled in Russia. AvtoVAZ is steadfastly advancing Lada-2110 and its modifications that are close to the latest standards. Also, it has been preparing to start manufacturing light and comfortable compact cars of the Kalina VAZ-2119 type, which the market has long been expecting.
Analysts predict: in the forthcoming years the level of purchasing power in the Russian market of passenger cars will grow significantly. Cars costing from $6,000 to $10,000 will be most demanded for (42 %) and the niche of cars costing from $10,000 to $15,000 will be up from 8% to 23%. Russian carmakers are concentrating their efforts to ensure supplies to the growing domestic market in the first place but they would not mind trying their luck in the West as well.
So, what do Russians have in store to surprise the experienced Europeans? During the Leipzig AMI-2004 auto show AvtoVAZ demonstrated a variety of cars. Besides standard models of the ‘tenth family’ (all of them having engines conforming to the Euro-3 requirements), it presented the double-fuel, multi-purpose car Lada-111 Twin Power, the racer Lada Super 1600 and the tuning version of the sedan Lada-110. Lada Automobile GmbH, the German partner of AvtoVAZ, participated in this project. In addition, Europe will see the medium-engine sports prototype Lada Revolution designed to participate in the Lada National Racing Series.
Cars with hydraulic steering boosters have recently got off the assembly line at AvtoVAZ. They have been developed with the participation of Germany’s company Zhanrad Fabrik (ZF). Units of the first batch have been completely assembled in Germany but the plans call for localizing their production in the future: the most important parts will still be supplied by ZF while the completion and assemblage works will be done at AvtoVAZ.
Setting up a joint production based on existing capacities is proving to be a successful direction of developing business in the Russian automotive industry. The example of the enterprise GM-AvtoVAZ is indicative in this sense. "We have been working on a new version of Chevrolet-Niva for over a year now and we have been implementing a special program to make this car conform to the European standards with respect to ecology and safety. The recent tests prove that we are moving in the right direction", officials from this JV state. Over 1,200 changes of the engineering nature has been introduced in the car structure that have made it much more reliable and comfortable. The model is as good as foreign-made cars of its class and, at the same time, it remains quite affordable for Russian consumers. In 2005 the manufacturing volume should reach 75,000 cars a year.
The application of Western technologies allows to update the whole engineering policy of the country’s car making enterprises. Today, many components are already being manufactured at Russian plants. What is more, their quality is confirmed by a large number of diplomas and certificates from international control authorities proving that it has reached the level of competitiveness. It seems that because of this fact, it becomes possible to raise the question about making the Russian automobile market more open. And to do it, first, for automobile components. Russia’s Ministry of Industry and Energy has proposed to reduce customs duties on components for assembling foreign models in Russia. If this proposal is adopted, already this year customs duties may be cut down as much as 10 times, from 30% to 3%. Such a reduction can make these automobiles the most attractive in the Russian market and bring the competition up to a new stage.