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Chinese OEMs and suppliers penetrate the Russian market

MOSCOW – Chinese-made SUVs, pickups, vans, buses and trucks were seen on display in great variety and in large numbers at the 9th Moscow International Motor Show in late August.

The Kransnsya Presnya Inter-national Exhibition Center featured close to 1,100 exhibitors from 30 countries, attracting 150,000 visitors to the five-day trade event that concluded on August 28. In addition to Chinese vehicles on display, the Moscow Motor Show featured a China Pavilion comprised of more than 100 parts and components manufacturers from around China.


Great Wall: the leading Chinese brand in Russia


Vehicles on display in Moscow came mainly from state-owned, share-holding and private automakers in China, such as FAW, Dongfeng, Beiqi-Foton, Great Wall, Xinkai, BYD, Mudan, Yutong and Golden Dragon.


Currently, Chinese-made automobiles are sold by leading Russian importers and distributors. The IRITO Group, one of the top five automobile importers in Russia, is now dealing with a variety of passenger and commercial vehicles made by FAW, Dongfeng, Beiqi-Foton, Great Wall and BYD.

¡°Of all the Chinese vehicles sold in Russia, Great Wall has had the best performance,¡± IIona V. Denisova, IRITO¡¯s commercial vehicle director told CAR, ¡°Annual sales of Great Wall vehicles in Russia total several thousand units.¡±


IRITO began selling SUVs made by Great Wall and Xinkai Automobile in November of 2004. Currently, IRITO has about 100 dealers of Chinese vehicles around Russia.


At IRITO¡¯s stand was Great Wall¡¯s 4×4 Hover CUV, which has just been released in China. The Hover had a sticker price of $26,000-$28,000, which includes a 35 percent import tariff. The same vehicle sells in China for ¥109,800-¥135,800 ($13,556-$16,765).


Other Great Wall vehicles now available in Russia include the Deer G1, G2, G3 and G5 pickups, and Safe SUVs. Great Wall Deer pickups now rank No. 1 in sales in Russia¡¯s pickup market.


¡°We just signed an agreement with FAW and Dongfeng last May to sell the FAW mini-truck and the Dongfeng light truck and bus in Russia,¡± said Denisova. She said her company believes that China¡¯s automobile industry will have a bright and successful future. But most importantly, Chinese-made vehicles are very competitively priced. ¡°Chinese automobiles are much cheaper than Korean makes,¡± she said. ¡°And they are made with comparable technology and quality.¡±


IRITO also displayed the BYD Flyer minicar and the Beiqi-Foton van at its stand. Based on consumer response, the company will make a decision whether to import these two vehicles in quantity. Crowds of people were seen looking closely at the Flyer, which had a price tag of $7,000.


Chinese commercial vehicles test the market


The Mudan Automobile Holding Co., Ltd., one of the largest bus makers in China based in Jiangsu Province, participated at the Moscow Motor Show for the first time, displaying two units of large buses.


As Mudan is new to the market, the company has only one distributor in Russia. ¡°We will be working with more local importers and distributors,¡± said Lu Jianping, general manager of Mudan¡¯s Overseas Department in an interview with CAR. ¡°We see a large market here according to our study. We expect to sell 100 to 200 units of buses here in the first year.¡±


The advantage of Chinese buses is low cost. ¡°Our buses are priced at about 60 percent of the cost of a European make,¡± said Lu. ¡°In terms of the exterior finish and interior trim, our buses are much nicer than Russian makes. We also have better chassis technology.¡±


The biggest problem for Mudan as well as for other Chinese automakers is aftersales service in Russia. ¡°We will work first with our local dealers,¡± said Lu. ¡°We will provide them with our spare parts and components and dispatch one or two service engineers to Russia.¡±


PKK, a local automobile importer with 15 dealers, displayed Golden Dragon medium buses and JAC light trucks at the show. ¡°We want to test the market in Russia,¡± PKK sales manager Yury L. Sannikov told CAR. ¡°Although the quality of these products is OK, imported automobiles are still subject to Russian technical specifications. Sannikov expects that a favorable Russian policy for importing automobiles would be released some time soon.


Yutong Automobile, another leading manufacturer of large buses, also displayed two of its vehicles at the show. Currently several of its bus models are available in Russia. Yutong entered Russia in early 2004 and has spent eight months getting a distribution license. Its local sales volume is still small.


Promising aftermarket


The Moscow Motor Show allocated its largest ever exhibition area for spare parts, automobile components and accessories, reflecting the growing size of Russia¡¯s automotive aftermarket.

According to statistics from NAMI, a Russian vehicle and components certification authority, there are 24.2 million cars registered in Russia, including 2.5 million in Moscow alone. NAMI estimates that if 70 percent of the vehicles are in operation and if every car owner spends an average of $200 a year on spare parts, the capacity of the Russian aftermarket would reach $10.5-$11 billion by 2010.

Currently, Russia has only around 200 OEM suppliers, with a total output value of $10.2 billion a year. They supply Russian automakers such as AVTOVAZ, IZHAVTO, GAZ and UAZ, as well as foreign-invested assembly plants such as Ford in Vsevolozhsk and GM-AVTOVAZ in Tolyatti.


To tap into Russia¡¯s aftermarket, nearly 300 executives from over 100 Chinese auto parts manufacturers participated in the Moscow Motor Show, forming one of the largest overseas pavilions.

Most Chinese exhibitors believed that the Russian aftermarket is potentially huge, given the number of vehicles on the road as well as the shortage of affordable replacement parts.


¡°The price of a brake hub in the local parts market is equivalent to ¥200,¡± said Huang Peng, director of Autotec Industrial Alliance Co., Ltd. ¡°We can offer such a brake hub for as little as ¥10 per piece through quantity export.¡±


While there is big money to be made in aftermarket parts and components, Russia has few qualified wholesale dealers and warehouse distributors. ¡°Most visitors came to my booth with little planned sourcing quantity, which will lead to very high logistics costs,¡± said Zhou Yunlong, marketing director of Beijing United Automobile Motorcycle Manufacturing Co., Ltd. ¡°We should be able to do a lot of business here if there exists a large local importer that specializes in Chinese auto parts and components.¡±


Fuyao Glass, major aftermarket supplier


Without any doubt, the Fuyao Glass Industry Group is now the most successful Chinese supplier in Russia.


While most Chinese exhibitors formed a China pavilion, Fuyao displayed its products and services at an independent pavilion in Hall 6.


¡°We came to Russia in early 1999,¡± said Wei Youjin, manager of Fuyao Glass (Russia) Co., Ltd. in an interview with CAR, ¡°We have set up 14 distribution centers around the country.¡± Wei said that everybody in Russia¡¯s automotive circles knows about Fuyao Glass because of its quality and high performance to price ratio.


Fuyao is China¡¯s largest OEM and aftermarket glass supplier and the world¡¯s fifth largest such supplier. Growing out of a small glass factory, the privately owned auto-glass giant today owns three float glass production bases in China and four overseas distribution centers.


¡°Fuyao has to satisfy the Russian PCT, a local quality certification standard for foreign products,¡± said Wei, ¡°in addition to the CCC, ISO 9000 and other relevant quality certifications in China.¡±

Although Fuyao currently supplies mainly to the aftermarket in Russia, it is preparing to supply local OEMs, such as Lada.

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