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

Sunni-Shi’ite Divide Threatens Middle East Stability

Analysts say ancient dispute that traces back to Islamic Revolution is fueling modern day unrest More

Shifting Demographics Lie Beneath Racial Tensions in Ferguson

As Missouri suburb morphed from majority white to majority black, observers say power structure remained static More

Video Artists Shun Russia's Profanity Law

Restriction is toughest since Soviet era, though critics reject move as patronizing and ineffective act of censorship in line with a string of conservative morality laws 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.
Native Bees May Help Save Cropsi
X
Deborah Block
August 22, 2014 12:23 AM
U.S. President Barack Obama has called for a federal strategy to promote the health of bees that have been declining. The honeybee has been waning due to parasites, disease and pesticides. Wild bees may be used to take over their role as crop pollinators. Scientists first need to learn a lot more about wild bees, says biologist Sam Droege, who is pioneering the first national inventory on native bees. VOA’s Deborah Block went to his research laboratory in Beltsville, Maryland, to bring you more.
Video

Video Native Bees May Help Save Crops

U.S. President Barack Obama has called for a federal strategy to promote the health of bees that have been declining. The honeybee has been waning due to parasites, disease and pesticides. Wild bees may be used to take over their role as crop pollinators. Scientists first need to learn a lot more about wild bees, says biologist Sam Droege, who is pioneering the first national inventory on native bees. VOA’s Deborah Block went to his research laboratory in Beltsville, Maryland, to bring you more.
Video

Video US Defense Officials Plan for Long-Term Strategy to Contain Islamic State

U.S. defense officials say American air strikes in Iraq have helped deter Islamic State militants for the time being, but that a broad international effort is needed to defeat the extremists permanently. Defense Secretary Chuck Hagel warned Thursday that the group formerly known as the Islamic State in Iraq and the Levant, or ISIL, is better organized, and financially and militarily stronger than any other known terrorist group. Zlatica Hoke has more.
Video

Video Drug-Resistant Malaria Spreads in Southeast Asia

On Thailand’s border with Myanmar, also known as Burma, a malaria research and treatment clinic is stepping up efforts to eliminate a drug-resistant form of the parasite - before it spreads abroad. Steve Sandford reports from Mae Sot, Thailand.
Video

Video Gaza Conflict, Hamas Popularity Challenge Abbas

The Palestinian unity government of Mahmoud Abbas has failed to convince Hamas to agree to Egyptian-negotiated terms with Israel on a Gaza cease-fire. VOA State Department Correspondent Scott Stearns reports on what the Gaza conflict means for President Abbas, with whom U.S. officials have worked for years on a two-state solution to the Israeli-Palestinian conflict.
Video

Video Nigeria's 'Nollywood' Movie Industry Rolls in High Gear

Twenty years after its birth in a video shop in Lagos, Nigeria's "Nollywood" is one of the most prolific film industries on earth. Despite low budgets and whirlwind production schedules, Nigerian films are wildly popular in Africa and industry professionals say they hope, in the future, their films will be as great in quality as they are in quantity. Heather Murdock has more for VOA from Lagos.
Video

Video UN Launches 'Biggest Aid Operation in 30 Years' in Iraq

The United Nations has launched what it describes as one of the biggest aid operations in 30 years in northern Iraq, as hundreds of thousands of refugees flee the extremist Sunni militant group calling itself the Islamic State. As Kurdish and Iraqi forces battle the Sunni insurgents, the fighting has forced more people to flee their homes. Kurdish authorities say the international community must act now to avert a humanitarian catastrophe. Henry Ridgwell reports for VOA from London.
Video

Video Cambodian American Hip Hop Artist Sings of Personal Struggles

A growing underground movement of Cambodian American hip hop artists is rapping about the struggles of living in urban America. Most, if not all of them, are refugees or children of refugees who came to the United States from Cambodia to escape the Khmer Rouge genocide of the 1970s. Through their music, the artists hope to give voice to immigrants who have been struggling quietly for years. Elizabeth Lee reports from Long Beach, California.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.

AppleAndroid