During
the soviet era, the only cars available to Russian consumers were domestically
produced soviet mark vehicles. These cars we released by series, as opposed to
years, and were only able to fulfill 40% of domestic demand. Today the streets
of Moscow have radically transformed and the Russian consumer now has the
luxury of choosing from a wide range of vehicles from all over the world. This
presents foreign producers with a tremendous opportunity as Russia is poised to
surpass Germany as Europe’s larger auto market by 2014, with sales projected to
rise to 3.4. Million vehicles sold annually. Moreover, Russia accession to the
WTO has provided foreign producer’s cheaper entry into the market as the price
of tariffs for imported goods has fallen and will continue to fall. Whether
this will actually have the effect of reducing the cost of entry is
undetermined, but what is certain is that total revenues for automakers doing
business in Russia has surged to $75 billion and growing.
The
heavy hitters in the market are increasingly foreign marks, with Chevrolet,
Renault, Kia and Volkswagen leading the way. Russia’s booming market is great
news for Detroit and auto manufactures around the world as it provides some
reassurance if profit to compensate for the flailing European market. Even with
the surge in imported vehicles, AutoVaz produced “Lada” still holds a
commanding lead in sales, accounting for 18% of the market place. While this
number is substantially higher than the number two competition, General Motors,
AutoVaz’s share has been rapidly declining in recent years, falling from 24% a
year ago. To give a picture of how much the Russian market has change in a few
short years, Russian domestic producers had a 93% market share in 2000.
Projections
estimate that much of the growth will benefit foreign manufactures and while
the Russian Lada will still be somewhat competitive, most consumers in favor of
an import will overlook it. Recently, in a sign of life from AutoVaz, the
company agreed to let Renault and Nissan raise its stake in the company, to
75%, giving them a controlling stake and allow them to dictate the future of
the brand. This will allow the Lada to become more competitive and efficient in
its production by utilizing the technology of the foreign manufactures in its
production line. One of the main complaints Russian consumers have with the
Lada is it is cheaply made and lacks the quality of the foreign competition.
The Russian government has for a long time attempted to protect the industry but
that no longer seems possible with the rise in Russian consumer capital and
increasingly strong Russian auto market. Abiz.ru has recently released a report
the Lada will receive a makeover in the next year, potently making it more
attractive to consumers. The future of the Russian automotive market seems very
lucrative but Lada’s place in the market seems less secure. They must improve
the quality of its product to become more competitive, something AutoVaz seems
willing to do.
No comments:
Post a Comment