News / Europe

American Car Makers Bet Billions on Russia’s Car Boom

US Automakers Bet Billions on Russian Car Boomi
|| 0:00:00
X
James Brooke
September 05, 2012 1:25 PM
Russian-made cars used to conjure up images of boxy, broken down vehicles with boring designs. Now car sales are jumping and car makers from outside of Russia are investing. James Brooke reports from Moscow.
James Brooke
— Russian-made cars used to conjure up images of boxy, broken down Ladas. Now car sales are jumping and foreign car makers are investing billions.
 
This week, Moscow’s International Motor Show is supplying plenty of glitz. But behind the hoopla, the real excitement is that Russia is on its way to become one of the world’s top five car markets.
 
With sales jumping in Russia, and slumping in Europe this year, Russia is projected to displace Germany in 2014 as Europe’s largest car market. That would make Russia the world’s fourth largest car market - after China, the United States and Japan, according to the research group Euromonitor.
 
Russia finally joined the World Trade Organization last month. Now car companies are racing to boost production before import tariffs start dropping.
 
Each of the American big three automakers - Ford, GM and Chrysler - plans to invest $1 billion in car factories in Russia.
 
“We were the first ones in here 10 years ago, and we’ve built over 500,000 vehicles here,” says Ted Cannis, president of the Ford Sollers joint venture in Russia. “This is a key, core place in Russia. And we see a huge potential for Ford.”
 
A few stands away, James Bovenzi, GM’s president for Russia, says GM’s plan is to double its Russia production over the next five years.
 
“GM values the Russian market,” Bovenzi says. “We see it as one of the big growing markets in the world.”
 
To generate buzz in Russia, GM invited Henry Kissinger to their plant expansion ceremony last June in St. Petersburg.
 
With car sales up 14 percent in Russia so far this year, dealers are struggling to meet demand.
 
At a brand new Chrysler dealership on Moscow’s beltway, John Stech, Chrysler Russia CEO, talks about the demand.

“We've brought completely refreshed vehicles, all new vehicles, onto the Russian market,” he said, while visiting the dealership for the first time. “And they really resonate with the Russian customers. For a while we couldn't get enough. Now we have a better supply, and we see this really in the activity in our dealers."

And there is room for growth. There is about one car for every four Russians - about half the average for Western Europe and the United States.

Chris Weafer, strategist for Troika Dialog, says Russian consumers have money in their pockets.

"It is one of the fastest growing consumer markets in the world,” he says. “And that’s coming on the back of very strong disposable income growth - about $8,000 this year, rising to a projected $12,000 in about 4 or 5 years time. So people have more money to spend on consumer goods."

Bernard Sucher, a long-term American investor and sometime Russia critic, comes from Detroit, home of the Big Three American manufacturers.  The Motor City native is impressed by what is happening in Russia.

“They`ve done a pretty good job in encouraging global producers and suppliers of addressing Russian markets in terms favorable for foreign players, but at the same time promising that Russia will retain substantial manufacturing capacities itself,” Sucher says. “It`s a good story. It’s a win-win story. And we would like to see more of that.”

Now, with all the new cars hitting the streets,  Russia’s challenge is to build parking - and roads.

You May Like

Video China Investigates Powerful Former Security Chief

Analysts say move by President Xi is an effort to win more party support, take step toward economic reforms, removing those who would stand in way of change More

South Africa Land Reforms Still Contentious 20 Years Later

Activists argue that the pace of land reform is slow and biased; legal experts question how some proposed reforms would be implemented More

In Vietnam, Religious Freedoms Violated, UN Finds

Beliefs reportedly prompt heavy surveillance, intimidation and travel restrictions More

This forum has been closed.
Comment Sorting
Comments
     
by: Worry from: U.S.
September 05, 2012 4:55 PM
I wonder how long the enthusiasm will last. The annual income level seems a bit high at $8000, but let's assume it is correct. If we divide that figure by 12 and round it up, we are looking at $667 a month in income. Next, let's assume that car sell for $15,000. The monthly payments on that car if it were financed without interest(not reality)for five years, the payments would be $250. If we actually included realistic finance charges to the monthly payment, it would easily exceed 40% of the buyer's income. I do not think that an average Russian, assuming sanity, would even consider such vehicles. One could imagine a "Russian Repo" reality show if this whole thing ever took off.

In Response

by: Yoshi from: Sapporo
September 05, 2012 10:21 PM
Excuse me, this is my misreading due to not good English comprehension. Is $8000 per year not total income but disposable income?

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Gazans in Shelled School Sought Shelteri
X
Scott Bobb
July 30, 2014 8:16 PM
Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video A Summer Camp for All the World

VIDEO: During workshops and social gatherings, the Global Youth Village summer camp encourages young people to cooperate and embrace their differences, while learning to communicate with people from other countries. VOA's Deborah Block has more.
Video

Video From Cantankerous Warlock to Incorruptible Priest, 'Harry Potter' Actor Embraces Diverse Roles

He’s perhaps best known as Mad Eye Moody, the whimsical wizard in the Harry Potter franchise. But character actor Brendan Gleeson's resume includes dozens of films, and he embraces all the characters he inhabits with equal passion. In an interview with VOA’s Penelope Poulou, Gleeson discussed his new drama "Calvary" and his secret to success.

AppleAndroid