Will foreign car makers help revive domestic production?"

MOSCOW. (RIA Novosti economic commentator Yelena Zagorodnyaya) - The French car-making concern PSA-Peugeot Citroen has barely managed to jump into the departing train of the Russian car-assembly industry. On January 29, director of the Peugeot Citroen Russian project Didier Alton, governor of the Kaluga region Anatoly Artamonov and mayor of Kaluga Nikolai Lyubimov signed an agreement on the production of cars in the Kaluga region. This is one of the last agreements of this kind.

Such agreements allow global concerns to bring parts for car assembly into Russia with a zero or three percent duty. In turn, the producer assumes a commitment on localization, that is, gradual increase in the share of Russian-made parts in the cars. In adopting a resolution on the industrial assembly of cars in Russia in 2005, the government hoped to attract about two billion dollars worth of investment. This was the estimate of the then Minister of Economic Development and Trade German Gref.

In reality, the figure has proved to be much bigger. At the ceremony of signing the agreement, the current head of the same ministry Elvira Nabiullina said that Russia has concluded 23 agreements on the production of foreign cars and their spare parts on Russian territory to the tune of $6.5 billion. Government officials did a good job by putting off the time when they were going to stop accepting car assembly applications. Initially, they planned to shut the door to the car assemblers in 2006, but eventually left it open until the end of last year.

Peugeot Citroen concluded its agreement with the Russian ministry at the economic forum in St. Petersburg last summer. The documents signed yesterday simply specify the rights and obligations of the sides. The Kaluga authorities will provide 200 hectares of land for the project. The French concern will invest about 300 million euros into it and build a plant with a rated capacity of 150,000 cars a year, employing 2,600 people. Alton said that the plant will assembly medium class cars like Peugeot 308 and Citroen C4. In the first year of production, it will turn out 75,000 cars.

Some delay in making the decision to build a plant has already affected the French concern. The sales of its cars in Russia last year were far from impressive. In the estimate of the Association of European Businesses (AEB), Peugeot sales have gone up by 63%, but moved from the 15th to the 17th place on the list of the best-sold foreign cars (see the table). The numbers are not great, either - 24,951 Peugeots against 175,793 Fords. Sales of Citroens went down by 6% against the average 61% increase in the market of new foreign cars.

But the PSA-Peugeot Citroen concern, as well as Suzuki, Hyundai and Mitsubishi, which signed agreements on commercial assembly with the Russian ministry in 2007, are not yet desperately late. The Russian car market is far from being saturated. In the estimate of Ernst & Young, by 2010, when the new assembly production lines will start working, the market will be able to absorb 3.8 million cars, including 2.5 million-2.8 million new foreign cars. According to the AEB, in 2007 2.3 million new cars were sold in Russia, including 1.6 million new foreign autos.

In general, the forecasts are quite optimistic for PSA-Peugeot Citroen and other 22 participants in the assembly projects. In 1934 Stalin said: "We had no automobile industry, but now we have our automobile industry." Can we repeat this now? Do we have it or not?

Leading global car-making concerns are invited to take part in car assembly projects for two reasons - to meet the consumer demand and to upgrade the domestic car-making industry. Russian car-producers are hoping to import technologies which could be used at numerous plants making car parts and adjacent industries. We are hoping for a synergetic effect.

But for the time being, we have not seen any signs of it. Judge for yourself - all commercial assembly projects provide for 30% localization of production during the first five years of car assembly; 50% localization should be achieved in seven or eight years. Not a single assembly plant working in Russia on these terms is even five years old. Those that are successfully assembling and selling their cars in Russia on other terms have not achieved much in localization, either.

The example of a Ford plant in Vsevolozhsk is indicative. It started assembling cars in 1999. Its agreement with the Russian government provided for 50% localization by 2007. But it transpired in the summer of 2006 that the company could not use Russian-made parts. Its official explanations were very brief but it was clear that these parts were good for nothing. After long talks with the Russian Ministry of Economic Development and Trade, the project was changed in the August of 2006. Ford assumed a commitment to guarantee 30% localization by 2012.

It is obvious that any assembler with similar problems will resolve them at the talks with the ministry, emphasizing the number of new jobs and multi-million investments. They will be allowed to delay localization. Considering hundreds of allied companies, on a national scale this means that we will not be able to revive our car-making industry. The only good thing is that people will get stuck in traffic in comfortable cars.

Table

Sales of new foreign cars in Russia in 2007 (AEB estimate)

PlaceBrandNumbersGrowth compared with 2006(%)

1Chevrolet(incl. GM-Avtovaz JV)190,553 71

2Ford175,793 52

3Hyundai147,843 47

4 Toyota145,478 52

5Nissan116,498 54

6Renault101,166 40

7Mitsubishi100,609 46

8Daewoo 91,302 37

9 Kia 78,616 31

10Opel 66,329232

11Mazda 50,592 57

12Honda 38,631146

13Chery 37,120245

14Volkswagen 32,002 67

15Suzuki 28,597 77

16Skoda 27,535 86

17Peugeot 24,951 63

18Volvo 21,077 94

19Subaru 15,553105

20 Mercedes-Benz 15,330 65

Total (including foreign cars

that are not among the top 20) 1,645,630 61

Azerbaijan gains brilliant victory by liberating its lands - Chairman of National Congress
Azerbaijan gains brilliant victory by liberating its lands - Chairman of National Congress
Azerbaijan is a winner - Turkish government
Azerbaijan is a winner - Turkish government
Armenian PM's attempts to meet with Russian president fail
Armenian PM's attempts to meet with Russian president fail
Loading Bars
Latest
Belarus reports 1,689 new COVID-19 cases, 139,908 in total
Azerbaijan eyes to use potential of liberated lands for fishery development
UN office announces agenda of special session of General Assembly on COVID-19 initiated by Azerbaijani president
Additional assets brought for Russian peacekeeping contingent delivered - Azerbaijani MoD (PHOTO)
Azerbaijan gains brilliant victory by liberating its lands - Chairman of National Congress
Azerbaijani Defense Ministry expresses condolences to Iranian side (PHOTO)
Deposit liabilities of Georgian banking system decreases month-in-month
Phase 3 of OPEC+ could lead to immediate fall in oil prices
Azerbaijan reveals TOP-10 private non-oil exporters
Iranian Energy Exchange announces products to be on sale on December 5
Azerbaijani banks to fully сancel loan debts of martyrs' families
Lending by Georgian commercial banks down
Iran reveals forecast for oil sales for next year
Lari depreciation remains one of leading factors in Georgian debt growth
Georgia decides to ease entry regime for its citizens
Aztelekom LLC announces tender for purchase of electronic spare parts
Bentley hires jets to fly car parts to Britain during Brexit
National Bank of Georgia reveals volume of international reserves
Georgia sees increase in overdue debt
Uzbekistan, Afghanistan eye to achieve twofold growth in trade
Russia discloses volumes of agricultural products supplied to Georgia
Azerbaijan's State Security Service prosecutes Lebanese terrorist mercenary (VIDEO)
Ashgabat City Telephone Network opens tender for audit
EU extends relief measures for COVID-hit loans to March
Turkmenistan expands international cooperation through environmental diplomacy
Iran expands mobile phone imports
Azerbaijani Clean City OJSC signs tender contract
Israel expects $220 million in non-defence trade with Bahrain in 2021
Azerbaijan determines damage inflicted by Armenia on Fuzuli, Jabrayil districts
Turkey to continue providing all kinds of assistance to Azerbaijan - Turkish Minister of National Defense
Iran’s Bahar Azadi gold coin price still rising
Employment increases in Iran's Sistan and Baluchestan Province
Azerbaijan reduces lead exports
Investment in tourism transport infrastructure to help dev’t this sector in Turkmenistan - UNWTO
Georgia expects to start adoption of Oil Stockholding Act soon
Iranian president declares budget revenues for next year
Uzbekistan’s Agrobank to fund entrepreneurial activity under Islamic sharia law
Tightening of quarantine regime may be inevitable - TABIB
Iran expects increase of budget revenues
Georgian CEC to summarize final results of parliamentary elections on December 3
COVID-19 pandemic to displace business class cars from car rental market
Azerbaijan unveils data on local insurers' fees for 10M2020
Building for Turkish-Russian joint monitoring center under construction - Turkish Minister of National Defense
Georgia cultivates significant amount of land to combat marble bugs
Uzbekistan’s Tashkent registers largest number of private enterprises
Tourism can help protect, promote Turkmenistan’s culture - UNWTO
Volume of sales through Azexport portal continues to grow
New electricity facilities to be put into operation in Iran
Japanese agency funds project aimed at improving locust control in Uzbekistan
Georgian oil company trying to contain fuel price rise
Uzbekistan, Germany in talks over partnership with EU
Value of OIC states' import from Turkey shows decline
Azerbaijan's non-oil exports via 'Single Window' system increase
SOCAR Polymer remains export leader in Azerbaijan's private sector
Georgia aims to transpose renewables acquis
Kazakhstan's crude petroleum oil exports to Greece plummet
Construction of Kerki airport passenger terminal being completed in Turkmenistan
Azerbaijan's AzerGold becomes one of export leaders in public sector
Trilateral statement on Karabakh to contribute to long-term peace in region - Kazakhstan's President
Kazakhstan discloses volume of doses to be produced by COVID-19 vaccine plant
ASTS+ trading, clearing system to up productivity of Kazakhstan Stock Exchange
Azerbaijan announces recent COVID-19 death rate
Iran reveals its COVID-19 data for December 2
Azerbaijan presents video footage from Lachin's Garygyshlag village (VIDEO)
Oil prices steady as market awaits output deal
Iran's export to Afghanistan increases
Prices of Kazakh-manufactured diesel fuel down
Azerbaijan's October 2020 non-oil exports slightly rise
Expenses on construction of enterprises in Iran’s Semnan Province climbs
Resources from Southern Gas Corridor to be available via Serbian-Hungarian pipeline
Iran's non-oil export has increases
Iron ore concentrate production of giant Iranian steel companies grows
Events in Belarus, Nagorno-Karabakh region, Kyrgyzstan complicate situation in CSTO area – Putin
Turkmenistan working on development of infrastructure for gas export
Uzbekistan’s State Tax Committee announces tender for IT services
Azerbaijan confirms 3,942 new COVID-19 cases, 2,265 recoveries
Azerbaijan shows video footage from Soyudlu gold deposit of Kalbajar district (VIDEO)
Turkish companies involved in construction of new road to Azerbaijan’s Shusha (Exclusive)
Georgia aims to introduce mobile virtual network operators in 2021
Georgian 2021 budget bill calls for issuing new Eurobonds
Turkmenistan to conclude technical inventory of companies involved in fuel, energy sector
Details of Iran's budget for next year announced
Azerbaijan's oil fund discloses 11M2020 value of revenues from ACG oil-gas fields block
Kazakhstan to develop soil and geobotanical maps for its agriculture lands
SOFAZ's incomes from sale of condensate produced in Shah Deniz remain unchanged
Kazakhstan increases imports from Vietnam despite COVID-19 restrictions
Stability in South Caucasus very important for Turkey - FM
Baku Stock Exchange auctions notes of Central Bank
Azerbaijan, Turkey to establish first Hi-Tech Park in Karabakh
UNDP provides Georgia with protective gear to fight COVID-19
Foreign exchange reserves of Central Bank of Azerbaijan increase
Victory Day established in Azerbaijan
Foreigners decrease payments with bank cards in Azerbaijan
Uzbekistan, Afghanistan consider expanding co-op in banking, customs spheres
Azerbaijani president signs order on establishment of Day of Remembrance
Methanol production unit to be launched at Navoiazot chemical enterprise in Uzbekistan
Uzbekistan introduces digital technologies in water metering, water management automation
Natural gas production dynamics in Azerbaijan – Eni’s review
Number of Georgian companies registered in Turkey decreases
Azerbaijan hosts auction for state property privatization
All news