Activity intensification of Chinese automakers in Russia | InvestExp

15 Oct 2014 | Author: | Comments Off on Activity intensification of Chinese automakers in Russia | InvestExp

Lifan Breez

Activity intensification of Chinese automakers in Russia

Updated August 21, 2008

Recently several statements about intensification of the Chinese automakers#039; projects in Russia were announced at once. Despite the severe obstacles in the way of China#039;s companies in Russia, the prospect of settling at the growing market is of primary importance for the players from the most densely populated country in the world.

The Taganrog Automobile Plant (TagAZ) reported that it concluded certifying such cars as Vortex Estina (former Chery Fora) and Chery Tiggo of its own production. Welding and assembling of these makes will be performed in the present TagAZ#039;s lines in the active production departments. So, it means that the quality of the welding and assembling will equal the level of cars produced in Taganrog.

The technological upgrades made by the plant#039;s specialists resulted in the significant increase of ruggedness and safety of car#039;s body, since this was proved by the results of frontal and side crash tests. As for the other rules, the produced cars meet Russia#039;s safety requirements. This factor is of essential importance for the promotion of products at the Russian market, as analysts consider. Still, the Chinese cars#039; quality and safety raise some doubts.

In the nearest future, TagAZ plans to receive Vehicle type approval to the indicted cars and by August-end the plant starts shipping the trade cars to dealers.

As it came out recently, the Cherkessk auto plant, Derways, produced the pilot batch of Lifan Breez cars with the hatchback body. The release of this make takes place on Lifan#039;s booth within the framework of the International Moscow Auto Salon 2008 in August, 26-September, 7, and in autumn this new development comes to the market.

The car is equipped with 1,3L or 1,6L engine, and its configuration comprises power steering, air conditioner, all of the wiring systems, front airbags, ABS and EBD. Automir Company, the unique distributor of Lifan cars in Russia, will offer to the Russian consumers a Breez hatchback for RUR 290 000-330 000 (without the delivery to Russia#039;s regions).

According to the information of the analytical agency Avtostat (Tolyatti), in July the second Derways#039;s plant launched a new assembly line, w here Lifan Breez cars are assembled now (SUVs#039; production remains in the former departments, but will be stopped in the nearest future). In 2008 the Cherkessk plant is planning to assemble nearly 8 000 of Lifan Breez (of which about 75% are sedans) and nearly 200 000 of Derways#039;s SUVs.

In 1Q 2009 Lifan Breez cars will be produced at the full capacity after the welding and painting departments will be launched. The new enterprise#039;s capacities will total 50 000 of cars per year with the two-shift operation that will permit to increase the production to 75 000 of units. Moreover, now Derways is designing the third plant with the capacity of 150 000 cars per year, where the company plans to produce the cars coupled with the Chinese and European automakers, with which Derways is holding talks about the cooperation.

The AMUR plant, where the production of the Chinese SUVs has been stopped, launches another project. In Incom-Auto Company, the unique distributor of Geely and ZX in Russia, reported about the temporal closing of the Novouralsk conveyor line. Their production was suspended at the beginning of the year because of the introduction of Euro 3 toxicity regulations in Russia.

Lifan Breez

Currently, the AMUR plant completes the new ecological standard certification of ZX Landmark cars, and in the nearest future, the Chinese SUVs will return to the Novouralsk conveyor line. It is better to remind that their production at the AMUR started in May 2, 2007. The agreement with ZX Auto Company foresees the output of 3 000 Landmark cars per year.

Thus, within one and a half year, the AMUR should develop its own production of cars#039; bodies, and in the nearest 2 or 3 years it should localize no less than 30% of auto components. In the meantime, Incom-Auto Company temporally imported ZX Landmark cars in 1Q 2008. According to the data of Avtostat, within the indicated period the company sold 694 units of SUVs, as well as ZX Grand Tiger pick-ups.

By the year-end the company plans to sell 1 500 of ZX.

Despite such success, Avtostat#039;s analysts revised the forecasts concerning the growth rates of the Chinese cars#039; stake at the Russian auto market. It is almost impossible now to get privileges for the Chinese cars#039; assembly on the Russian enterprises. Chery#039;s SKD at Avtotor plant with the use of the special economic area#039;s advantages in Kaliningrad is suspended.

Geely project at the AMUR plant in Novouralsk goes slow paces. The Cherkessk Derways plant demonstrates very slow assembly rates of the Chinese SUVs as well. Other Chinese projects aren#039;t even launched yet.

So, the Chinese auto industry doesn#039;t show any powerful penetration to the territory of Russia yet, is said in the company report.

According to the forecast of Avtostat, as per the results of this year the total sales#039; volume of the Chinese passenger cars totals no more than 70 000 units and only in 2009 it reaches the level of 100 000 cars, though such level has been forecasted for this year. However, one should not forget about the strong pressure of the internal Chinese market that will result not only in the rapid quality and in competitiveness improvement of the Chinese cars, but will compel China#039;s auto industry to look for the entries to the export markets.

So, Russia is the most convenient and prospective direction here. Since 2010, the increase of the Chinese cars#039; sales at the Russian market can reach the 50%-60% level per year, and by 2012 their total volume of realization will attain the mark of 380 000-400 000 cars per year.

First of all, the Chinese attack threatens the Russian economy players, AvtoVAZ in particular. Until recently, the Tolyatti auto giant was almost the monopolist with the price niche of $8 000-10 000. However, China#039;s cars cost less taking to account the relatively equal consumer and operating properties, and this fact favorably differentiates them from the Japanese, Korean, as well the European cars.

If the analysts#039; forecast of the expansion of China#039;s presence at Russia#039; auto market realize, the cheapest makes of Lada (the classics and Samara) will have to fight for a place in the sun. Obviously, the Tolyatti top makes #8212; Lada Kalina and Lada Priora #8212; will compete with such brands as Hyundai, Ford and Kia, as well as with the cost effective makes of the European and American auto concerns. As for the prospective AvtoVAZ#039;s developments, they will obviously be more expensive and will join the segment of $14 000-18 000, where the competition peaks.

However, as per the last data, the Tolyatti auto giant is preparing the new cost effective development #8212; the plant continues to design Lada Low Cost. The concept will be accomplished by the year-end. Obviously, this development will replace the out-of-date classics.

If the designers manage to meet the mark of $7 000-8 000 with the appropriate level of the technological, engineering and design solutions, AvtoVAZ will regain its status quo in the lowest price segment of the Russian market.

Lifan Breez
Lifan Breez
Lifan Breez
Lifan Breez
Lifan Breez
Lifan Breez

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