The emergence of AvtoZAZ as a major force in central Europe has been an unexpected development, but the Ukrainian company’s bold move into Poland, acquiring FSO at the end of last year for a nominal sum, could bring unexpected dividends.
Go deeper with GlobalData
The success of General Motors’ relaunched Chevrolet brand – the automaker formerly known as Daewoo – means it needs more low-cost capacity in Europe and AvtoZAZ-FSO is perfectly positioned to provide it.
GM wants to build up to 100,000 cars a year, and FSO has capacity in abundance. At full tilt, the plant could – and under the old Communist regime, did – produce well over 300,000 cars a year. But last year, it only operated at around one tenth of its capacity, and although AvtoZAZ is investing heavily in the plant and forecasts production of 150,000 cars a year in 2007, the arrival of GM on the scene solves one key issue – what to build.
FSO’s Warsaw plant currently still builds a number of Daewoo designs including the Lanos and Matiz models. This is a legacy of the plant’s ownership by Daewoo – it was bought in 1995 as part of former Daewoo chairman Kim Woo-choong’s ill-fated global expansion drive. When GM bought Daewoo it took a cautious approach, and did not include most of the global plants that Daewoo had either acquired or bought.
Instead, it continued to licence out the old Daewoo designs – which it now owned – to the former partners. But FSO’s licence runs out at the end of this year – it urgently needs replacement models. GM needs to be diplomatic here – while its objective is to build Chevrolets for sale in Europe, AvtoZAZ-FSO wants cars it can sell under its own brands.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataGM has maintained a relationship in the Ukraine with AvtoZAZ, assembling various Opels and Chevrolets from CKD kits alongside AvtoZAZ’s self-developed Tavria hatchback range and a modified version of the Daewoo Lanos. AvtoZAZ is state-owned, and is part of UkrAvto, a vertically integrated group that includes car manufacturing, car sales and maintenance.
There are a number of options open to GM – it could sub-contract assembly to the FSO plant, or it could take a stake in the business. Either way, the Ukrainians, and the Poles, are going to want their own version of the cars. While ZAZ-brand cars have never been sold in any quantities in western Europe, FSO had a strong presence in the 1970s and ‘80s, and could seek to stage a comeback as an exporter. This might be a problem for GM – as FSO would effectively be competing with Chevrolet in Europe’s budget sector.
But the pros outweigh the cons. The combined AvtoZAZ-FSO business could be a useful partner for GM – it could provide a similar bridgehead into Eastern Europe as Romania’s Dacia has for Renault. With the capacity to build 400,000 vehicles, it has plenty of spare build availbaility. And its location gives the group a foot both in the EU and the former USSR – as Poland is now an EU member state, while Ukraine has duty-free access to Russia.
From GM’s point of view, this could offer a better route into Russia than AvtoVAZ, where the stumbling relationship to build AvtoVAZ-developed Niva SUVs and Opel Astras apprars to be on the rocks.
As a result, GM is likely to manage its risks by taking a multi-pronged approach to the Russian market. GM has already confirmed plans to build Chevrolet Aveo, Lacetti and Epica models from kits at Avtotor, the contract assembler based in Kaliningrad that also builds BMWs and Kias. GM is reportedly in discussion with the St. Petersburg authorities to build a new plant, though it won’t confirm this. AvtoZAZ-FSO gives it another option, and one that it’s taking seriously.
Mark Bursa
