In 2006, GM CIS, the General Motors subdivision in Commonwealth of Independent States countries, will be able to sell over 100,000 cars in Russia and, thus, reach record highs in the entire history of GM car sales in this country. However, this achievement will soon be surpassed: In 2007, GM is expected to increase its sales to 175,000.
This is a major triumph for the Russian automobile market. By experts' estimates, the potential volume of the market of new cars in Russia is 2 million, with nearly half of that number to be supplied by Russian car manufacturers. This makes GM the leader in foreign car sales in Russia.
Today, GM has several brands in Russia: Chevrolet, Opel, Saab, Hummer and Cadillac, which sell with varying degrees of success.
Chevrolet cars assembled by the Russian-American joint venture GM-AutoVAZ are unrivalled. In 2007, the company is expected to sell over 50,000 cars. At present, it produces two models: the Chevrolet Niva SUV and the Chevrolet Viva Sedan. The first model is based on a purely Russian project and the second was called the Opel Astra until recently. These models are not as popular in the United States as they are in Russia and Europe.
Apart from the joint venture with a Russian carmaker, GM has two production plants in this country: one in Kaliningrad, which turns out several Cadillac and Chevrolet models and the Hummer SUVs, and in St. Petersburg, which is under construction now. The first cars, including the Chevrolet Captiva SUV, are expected to come off the plant's assembly line in 2007.
GM is not the only car manufacturer with an interest in the Russian market. South Korea's Hyundai and SsangYong concerns also assemble several models in Russia. Ford produces the Focus, which is very popular in Russia, at a plant near St. Petersburg. France's Renault manufactures Logan Sedans in Moscow. Soon, two more major manufacturers will be added to this group: Japan's Toyota is building a car assembly plant in St. Petersburg, and Germany's Volkswagen is building in Kaluga.
Car manufacturers' interest in the Russian market is no surprise: its volume has been growing markedly in the past few years, and Jacek Gorski, commercial director for GM CIS, believes that in 2007 it will grow by another 10 percent to 20 percent.
However, dynamic changes on the Russian automobile market are not the only reason why foreign companies are launching production in Russia. The government's special program, which is to be continued in Russia for several more months, is designed to encourage car assembly in this country. Under this program, supplies of components and spare parts for the subsequent car assembly are exempt from custom duties. German Gref, Russia's economic development and trade minister, says that this special arrangement will be used in Russia until the middle of next year, and will be altered after Russia joins the World Trade Organization.
However, this does not mean that the government will stop adopting similar programs in the future. Gref said the government will continue working on investment agreements, but provisions that do not conform to WTO rules will be removed from them. Nevertheless, seven more agreements providing for car assembly in Russia are now being prepared. The Russian government hopes that more than 1 million automobiles will be assembled in Russia under this program by 2010. This means that the number of foreign cars assembled in Russia will equal the number produced by Russian plants.
In the future, the competition between car manufacturers is expected to become even tougher. The minister believes that foreign companies will have another seven years to develop the Russian market on beneficial terms, since a transitional period is envisaged for Russia after its accession to the WTO.
By Alexander Yurov