Blog: DaimlerChrysler and Russia
Dave Leggett | 15 December 2005
I'm not all that surprised that DC's plans to invest in Russia are taking a long time to sort out. It's a common theme among carmakers wanting to invest in Russia. The critical thing is to make sure that things like taxes and import tariffs are set at a level that means the local assembly operation can actually make some money. Given the state of the Russian supplier industry, with the best will in the world there will be a need to import quite a bit - especially on Mercedes models.
If the import tariffs are too high, the economic balance may well be tipped against making cars in Russia. The Russian government appears to want inward investment from Western makers, but it has to get that protection balance right or it will discourage investment.
If I was on the Russian side - advising central government - I think I'd want to fish in as many OEMs and Tier 1s as possible over the next five years. Create a stampede even. Once they are bedded in and committed, then you can tax 'em more if that's what you really want to do. But if they are in, there is a chance that the industry's critical mass starts to look better in international terms and the industry goes from strength to strength, attracting more investment and benefitting the Russian economy. Yes, there's a danger that the indigenous domestic industry suffers even more, but the cold shower might spark it into life and help bring in international partners also. The alternative is a slow death for the likes of AvtoVAZ as CBU imports continue to rise.
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