Renault’s global marketing vice-president Stephen Norman talks to Mark Bursa about the role Russia’s AvtoAVZ – and its Lada brand – will play in Renault’s global plans.
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Renault signed the deal that gives it a 25% stake in AvtoVAZ at the end of last month – and now the task is to work out how to integrate Russia’s biggest automaker, and its Lada brand, into Renault’s growing global framework.
The task of making this work falls largely on to the desk of Stephen Norman, who joined last year as Renault’s senior vice-president of global marketing. An Englishman who cut his teeth at British Leyland before spending stints in the international marketing departments of both Volkswagen and Fiat, he joined Renault late last year.
The Russian opportunity is clearly one that excites him. “The forecast for the size of the market month after month after month is even exceeding our most optimistic projections,” he said. “So although we’re planning on significant growth in the market in 2008; already January was well above what we were expecting. It is going to become one of the leading world markets. China is overtaking Japan to be the second biggest, and Russia will be up there.”
The AvtoVAZ deal gives Renault a great opportunity to take a leading position in the market – and the deal gives it the capacity to expand. The plant churns out around 750,000 cars a year, but in the past has topped the one million mark.
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By GlobalData“There is a capacity at the AvtoVAZ plant in Togliatti which is unused. I don’t know for how many years it’s been unused, but it’s unused for a long time, and that capacity could be brought into service for the Alliance, be it for Logans or other Renaults or eventually Nissans – although that’s not currently in the plan,” he said. “Whether the surplus production capacity at Togliatti will be 100% Lada or other things has not even to my knowledge been discussed.”
The surplus capacity will however allow the Lada brand to start selective import into some neighbouring territories – non-EU East European states and central Asian or Middle Eastern countries in particular.
The Lada brand is important, he believes. Established in the mid-1960s with Fiat technology, some of the original Fiat 124-based Lada ‘Zhigulis’ are still produced today, alongside newer vehicles such as the late-1980s 110 series and the Kalina/Priora subcompact range, which date from 2000. “Those cars will not be withdrawn from production just because Renault is arriving,” Norman said.
Instead Renault plans to help improve the quality of the Lada cars. “As Carlos Ghosn has said, there will be a management partnership to reinforce the quality of the current production, and progressively after that we’ll be able to acquire Renault technology, be that engines, transmissions, or platforms to make other cars.” Inevitably, ‘other cars’ means cars based on the low-cost Logan. “There is a general consensus that the Logan will be made by AvtoVAZ in the medium term.”
Of course, Renault is already a significant player in Russia thanks to its joint venture with the Moscow government, Avtoframos. This is based at the old Moskvich plant, and builds Logan and the four-door sedan Clio Symbol from CKD kits. The plant is being expanded to a production of 160,000 units a year, and this plan remains unchanged by the AvtoVAZ deal.
“The two are complementary because Avtoframos is making vehicles for Renault, and that production has just been increased [to 160,000] by a big investment to support the demand for the Logan across Europe and particularly in Russia. There is no project to withdraw from Avtoframos.”
Norman is paying close attention to how the cars will be distributed. Renault has built its own dealer network to sell the Avtoframos cars and other imported models, while AvtoVAZ has the largest retail network in Russia by far – the kind of coverage that no other Russian brand has. So where does that leave the existing Renault network?
“Well, we are selling Renaults through the Renault network in Russia – and in Russia the Logan is a Renault. We will be making Ladas in Togliatti. AvtoVAZ will be making Ladas that will be sold through the Lada network. Now if there is a future Lada product that is similar to an existing Renault product, we will have to make the decision at that time. But the decision to make what you know as the Logan as a Lada has not yet been taken.”
There is a reason for Norman’s caution about the extent of the ‘Renault’ input at Togliatti. “I think we need to be very careful. One of the reasons Renault was selected as the partner for AvtoVAZ is the very fact that as a company we are determined to preserve and give freedom to the Lada brand, and we need to be very clear on that. The Lada brand is not only the market leader in Russia. It also has potential for growth in Russia, and also in neighbouring states. There is nothing wrong with the Lada brand.”
As for exports to the West – that’s a more difficult proposition. Lada’s reputation in Western Europe is not a good one – Communist-era cars were poorly made and unreliable; cars imported to the UK required considerable reworking at a production line-style import centre.
However, the brand has struggled on through thick and thin in some mainland European markets; it has distributors in France, Italy and Germany and has maintained a regular presence at the Frankfurt and Paris auto shows, though volumes are small. And Norman says this will continue: “AvtoVAZ has a business and a brand called Lada that they distribute in the markets in which they are present. The arrival of our group in this partnership will change none of that.”
A further complication is the Dacia brand, which was relaunched at Geneva with a freshened-up logo – gone, finally, is the quaint Soviet-style typography, replaced with a simpler typeface and a distinctive U-shaped logo. Dacia has been surprisingly successful in Western Europe, selling Logan – and from later this year the Sandero hatchback – through selected Renault dealerships.
The Dacia brand is a very different proposition in Western Europe. “There is one marketing strategy for Dacia in Western Europe, and another strategy for Romania and Eastern Europe,” Norman believes.
In Western Europe, Logan is priced below EUR8,000, and the typical Dacia buyer has previously bought used cars and is probably buying his or her first new car. They are significantly less well off than the average new car buyer in Western Europe, they are slightly older and have a normal level of education. That is to say they haven’t been through university.” Research says they are buying on price, and they are looking for “robustness, spaciousness including the boot, and comfort for long journeys”.
In emerging markets, the fact that the buyer can afford a Logan suggests he’s relatively further up the social scale, probably university-educated and with a professional occupation. “For a Romanian with his buying power, to be able to buy a Logan, it’s a very significant purchase.”
So marketing Dacia is a complex issue, and one where Norman believes he’ll earn his money. “What we must not do is to concentrate on the Dacia brand so the customer no longer understands what it is we’re trying to sell him. So, unfortunately for me as a marketing manager, it is of lesser importance how we develop the brand Dacia versus Logan than the Renault brand versus the Logan.”
Norman believes there are lessons to be learned with regard to the Dacia brand’s development in Western Europe from VW’s experience with Skoda. “We have to be very careful in following the example of Skoda, where you pretend you’re making a low cost product but when you come to pay the price it may not be as low cost as all that,” he said.
“We have to avoid two dangers; first the danger of denigrating the customer, and secondly the danger of thinking we have to move the brand up market, and leave them behind.”
Mark ‘Coolbear’ Bursa
