BREAKING NEWS! Renault may make Romanian cars in Russia

Renault SA may replace Turkey with Romania as the main supplier of kits for a $300m project to produce 120,000 cars a year in Russia, sources told just-auto.com today.

A switch could signal new thinking at the French group about brand strategy for emerging markets because the vehicles in Russia likely would retain the badge of the factory in Romania, SC Automobile Dacia SA, bought by Renault in September 1999. (All models from Oyak Renault Otomobil Fabrikalari AS in Turkey bear the French marque.)

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Renault spokesmen declined to comment today on prospects of making Dacia models outside Romania, but French executives hinted earlier at the possibility.

Big plans for cheap cars

Informed observers said talks to build Romanian vehicles in Russia are advancing under a long-term scheme to boost annual output of Dacia from 100,000 (all domestic) to 450,000 (Romania and Russia plus China and India). The expanded volume would include 350,000 of a new car code-named X90, slated for launch in 2003 or 2004 with a base price of 5,000 euros ($4,545).

Renault already has pledged to grow Dacia sales in developing economies, but a burgeoning industrial role for the Romanian company may mean the French group sees new potential for Dacia, a producer of cheap models, most based ultimately on Renault 12 (born 1969). Among badges owned by global players, the Romanian marque alone may be able to generate significant sales in countries where buying power of consumers is severely limited. (Volkswagen AG once envisioned down-market duty for its subsidiary Skoda Auto AS. But the Czech company, now highly modernised, is shedding its budget-brand image. Automotive News Europe even reported suggestions Skoda would compete with products of bourgeois fancy from Volvo Car Corp of Ford Motor Co.)

Dacia 1300

An expansion of Dacia’s function may stem from depressing experiences in Russia

In July 1998, Renault agreed plans for a $420m car-making venture in Moscow named OAO Avtoframos, owned half by the French group, half by the municipality.
(‘Avtoframos’ is a composite: ‘Avto’ for ‘auto’; ‘fra’ for ‘France’; ‘mos’ for ‘Moscow’). The project was slated to manufacture 120,000 autos a year by 2005, but it has performed only basic assembly of Mégane Classic sedans and R19 sedans from kits supplied by Turkey. Output will barely reach 1,000 this year, due to continuing softness in demand in Russia, where 85% of sales of new models retailed below $5,000 in 1999. (Prices start at $13,500 for Mégane Classic and $7,500 for R19.)

To hone its programme to the austere market, Avtoframos has cuts its investment target by $120m, and it is looking to replace both models with one that is cheaper than Mégane Classic and newer than R19 (born 1988). The immediate substitute is Clio Symbol, a sedan introduced in 1999 and made exclusively in Turkey.

In September 2000, Avtoframos started importing completely-built Clio Symbol for retail in three trim versions: RN 1.4 for $8,500; RTE 1.4 for $9,900; and RTE 1.4 16v for $11,500. The company expects the model to comprise roughly half its turnover in 2001, though total volume may hit only 5,000, sales manager Volker Blau said at the Moscow motor show in August 2000.

Clio Symbol

Clio clipped?

Avtoframos recently assembled a sample set of Clio Symbol, but it seems sceptical of the model’s potential – even $8,500 for the basic edition is dear for most Russians. Doubts are evident in demure forecasts for output of: 3,000 in 2001; 8,000 in 2002: 10,000 in 2003 and 2004; and 5,000 in 2005, the final year.

The company still hopes to produce 120,000 a year, but the timetable may be postponed four years to 2009, and most volume could come from Romania in two stages.

In step one, Dacia would provide Avtoframos with kits of WD1, code-name for the facelift of its hatchback SupeRNova. WD1 could enter production in Romania in early 2002, and industry watchers anticipated a base price of 4,500 euros ($4,090), comfortably inside the $5,000 barrier for many Russians.

(The Romanian company can offer vehicles inexpensively because its operations are labour intensive with limited investment in automation, said Christian Esteve, Renault vice president for Eastern Europe and Dacia deputy general manager for commerce and finance. “The average salary of Dacia workers is $80 per month,” he added. Esteve spoke at AUTOCEE2000, an automotive conference in Warsaw in April 2000.)

According to sources close to Renault, kit shipments of WD1 could total 3,000 in 2003, 6,000 in 2004 and 10,000 in 2005 and 2006. Deliveries would stop in 2007, yielding to the dominant next phase.

In step two, Dacia would pump out kits of X90, perhaps starting late 2004. Volume could reach 13,000 in 2005, 50,000 in 2006, 85,000 in 2007 and 110,000 in 2008. Capacity could be stretched to allow output of 130,000 in 2009 and 140,000 in 2010.

Renault officials would confirm no details of any plans for Dacia in Russia, but key executives have broached the topic.

“I see potential in Russia for the 5,000-euro car that Renault is developing for Dacia,” Avtoframos general director Guy Bara said at the Moscow motor show. “But it is too early to discuss now – maybe in three or four years.”

Xcellent idea?

In reply to a question about the possibility of Avtoframos assembling X90, Esteve said at the conference in Warsaw: “If you have the idea, we have the idea also.”

[Esteve described the 5,000-euro car as W90, not X90. In Renault’s nomenclature, ‘W’ may designate future models in early development, while ‘X’ refers to a project that could include several related vehicles. (In April, the car still may have been in preliminary stages.) X90 is expected to include an estate or station wagon (K90) and notchback sedan (L90). In Russia, over 80% of planned output of X90 could be L90.]

Renault chair and chief executive Louis Schweitzer has not said Avtoframos would build Dacias, but he said he developed the concept for a 5,000-euro vehicle on a trip to Russia.

“The idea came to me when I first visited Russia,” Schweitzer said at the Bucharest motor show in September 1999. “I noticed the top-selling car there, Lada, cost about $6,000. This became a reference price in my mind.”

Eastern enticements

Among foreign manufacturers keen to build cars in Russia, Renault would not be first to change the model plan from a vehicle rooted in Western Europe to a product originating in Eastern Europe.

Since 1990, General Motors Corp has looked at making a model from its German subsidiary Adam Opel AG with AO AvtoVAZ in Russia. No plans have materialised, but GM now is working out a joint venture to produce a compact sport-utility vehicle from AvtoVAZ, Lada Niva 2123, under the US automaker’s badge Chevrolet. A deal could be finalised in February 2001.

AvtoVAZ, desperate for capital to launch new models, has proudly welcomed GM’s interest in Niva. But Renault could face difficulty in revising the Avtoframos mandate to include Dacia production: its agreement with the Russian state stipulates output of Renault-brand vehicles, and Avtoframos is unlikely to re-badge a Dacia under the French marque.

“We would offer Dacias as entry level cars, branded as Dacias, wherever we would sell them,” Schweitzer said. “That should be clear. A Renault is a Renault. A Dacia is a Dacia.”

Might Renault fight city hall?

The municipality of Moscow, a 50% owner of Avtoframos, could oppose Dacia assembly too. The city owns 60% of AO Moskvich, a carmaker in Moscow with bleak prospects. Avtoframos, initially a tenant of plant space at Moskvich, now owns facilities on Moskvich property. As WD1 and X90 could be better in quality and lower in price than many models of Moskvich, the city may view Avtoframos assembly of Dacia as threatening the fragile future of Moskvich.

New products

WD1, under development in Romania, could be available as a hatchback plus station wagon. (A driveable estate prototype exists.) It would use the current platform for SupeRNova, including Renault powertrain. The only engine available now is a 1.4-litre petrol, but a 1.9-litre diesel could be added soon. (The gas motor has been imported from Spain, but Dacia plans to start assembling it in January 2001.) WD1 likely would drop the name SupeRNova, and it would feature changes to the exterior and interior of the current model, including body-panel modifications and new headlamps.)

SupeRNova, solely a hatchback, debuted in October 2000 as a facelift of Nova, a Dacia vehicle introduced in 1995. It costs between 4,200 euros and 5,500 euros. Renault has touted SuperNova as its first product upgrade at Dacia, and the vehicle is said to embody many improvements in quality, besides the running gear. But industry watchers have lamented the lack of big changes in equipment levels and style of SupeRNova over Nova. [‘RN’ in SupeRNova is capitalised to establish a cosmetic link on the vehicle with Renault, alluding to a basic level of specification (RN) for the French group’s models.]

Dacia SupeRNova

Output of SupeRNova, a transient vehicle, could reach 40,000 in 2001, then drop to 20,000 in 2002, its last year, informed observers said. Its successor WD1 would start at 40,000 in 2002, peak at 80,000 in 2003, then recede to 50,000, coinciding with the launch of X90. (Experts believe WD1 could stay at 45,000-60,000 for several years, as a slightly cheaper alternative to X90.)

Dacia expects domestic sales of SupeRNova to reach 33,500 in 2001, Esteve said in October, according to Reuters. Over 6,000 could be shipped next year to foreign markets, including Argentina, China and Poland, he added.

Renault has disclosed no details about X90 except price, and this has looked confusing. Initially, the company quoted the sum in dollars ($6,000), but it switched to euros (5,000 euros), suggesting an equivalence of the figures. But $6,000 is roughly 6,600 euros, and 5,000 euros is roughly $4,545, so a disparity of $1,455 or 1,600 euros exists – seemingly a lax gap for a vehicle being developed under ascetic fiscal restraint.

As few Romanians can afford two vehicles, X90 would need to appeal widely to entrepreneurs and families, so the model probably would seat five people and store 350-400 litres of luggage. Dimensionally, it could be 3.9m-4m long and 1.55m-1.6m high with a wheelbase of 2.5m-2.6m. It could ride on the future platform for Renault Clio and Nissan Micra, and the powertrain initially could be the same engines and gearboxes in WD1, though 1.6-litre and 1.8-litre petrol motors could be added later.

Xtremely simple

Because of its bargain price, X90 will be frugally equipped and styled.

“It will be a bare vehicle,” one commentator said. “The interior will be extremely simple: basic upholstery, limited roof lining, lots of exposed metal, rubber mats. The steering column will not be adjustable. The instrument cluster may have only a fuel gauge and speedometer, inserted into a rudimentary fascia with no centre console.”

X90 would become Dacia’s principal vehicle immediately. Observers anticipate a rapid rollout of production from 30,000-40,000 in 2003 to 125,000 in 2004, though this forecast excludes any contemplation of the Romanian automaker supplying kits to Avtoframos. Independent of any plans for Russia, Dacia is expected to export a majority of its X90s, perhaps 75,000 at peak production. (In October 2000, Schweitzer said the 5,000-euro car may not be launched until early 2004.)

When Renault bought a 51.005% stake in the Romanian automaker for $50m, it promised to invest an additional $219.7m to modernise Dacia commercially and industrially over five years. Objectives include shrinking the workforce from 29,000 to 16,000, while doubling annual production from 100,000 to 200,000, and boosting the percent of outsourced parts from 47% to 70%.

Besides launches of SupeRNova, WD1 and X90, Renault plans to renew Dacia’s light-commercial vehicles, now limited to pickups based on Dacia Classic (1300 model range), derived from Renault 12, Esteve said in Warsaw. But no details about new commercial vehicles have been released.

Renault now owns 80.137% of Dacia, based 140km northwest of Bucharest in Colibasi. (Historically, Dacia was an ancient kingdom and later Roman province between the Carpathian Mountains and Danube River.) Dacia’s other shareholders include Broadhurst Investments with 6.113% and Romanian Investments Co with 4.47%, according to Reuters.

The French company has grown cautious about disclosing schedules for Dacia’s future products, due to the adverse impact on the Romanian factory of previous prognoses. After Renault said in late 1999 it would introduce a facelifted Nova in fourth-quarter 2000, Dacia output collapsed, as thousands of Romanian consumers chose to postpone purchases until the improved model arrived. Production, though recovering in recent months, still is down 35.7% (51,529 in January-November 2000 versus 80,190 in January-November 1999), according to the Association of Automobile Producers and Importers (Asociatia Producatorilor Si Importatorilor De Automobile or APIA).

But Dacia general manager Constantin Stroe said in October 2000 the company could return in 2002 to its best year of production of 106,001, achieved in 1998. One analyst generally agreed, forecasting volumes of 91,000 in 2001, 110,000 in 2002, 135,000 in 2003 and 200,000 in 2004.

As Dacia dominates the auto business in Romania, the market has suffered too. Demand for new light vehicles fell 32.2% to 70,984 in January-November 2000 from 104,676 in January-November 1999, APIA reported. The company’s share sunk to 61% this year from 73.2% last year.

To see related articles in our Knowledge Store, please follow the links below:-

https://www.just-auto.com/store/products_detail.asp?art=10374

https://www.just-auto.com/store/products_detail.asp?art=10358

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