ARNPO is the largest purchasing company in Russia covering 36% of the market

ARNPO is the largest purchasing company in Russia covering 36% of the market

Avtovaz Renault Nissan Purchasing Organisation's (ARNPO) scale in Russia is quite staggering in a country which specialises in the colossal and the gigantic. ARNPO Alliance localisation director, Denis Chirkov outlined some of the issues in this challenging country, but which is coming back strongly after years of recession at the recent Russian Automotive Forum organised by Adam Smith Conferences in Moscow.

The organisation's power in Russia can be gauged by the fact it is the largest purchasing company in the country covering 36% of the market and responsible for supplying all Alliance brands.

The division is keen to promote export opportunities for Russian suppliers, but that comes with exacting conditions such component manufacturers confirming to Alliance Supplier Evaluation Standard (ASES).

But it's not just at home where ARNPO is looking to make its mark. As well as encouraging localisation – with strict caveats on quality and tough joining conditions - the purchasing body is also looking to increase its export value to a potential EUR200m (US$240m) by 2020.

ARNPO was a key speaker at the recent Russian Automotive Forum in Moscow, with the Alliance localisation director outlining some of his thinking surrounding supplier issues in the country.

Just-Auto was in Moscow for the conference, which took place against the most up-beat mood for four years as Russia emerges from its long, deep recession, in part caused by international economic sanctions imposed by the West in retaliation for its annexation of Crimea.

The ARNPO director was a key speaker at the event and turned his attention to some of the main issues in Russia today.

JA: Are you in favour of the government-mandated insistence on overseas companies localising in Russia?

DC: We all know Decree 166 and Decree 566 [mandated localisation] and new Decrees will include tough requirements for localisation and we support this.

JA: To what extent can Russian suppliers leverage their skills to become competitive in exports and what ambition does ARNPO have in that regard?

DC: In 2016 we started with EUR40m [export], in 2017 we had turnover of EUR100m and by 2020 we want to achieve EUR175m to EUR200m. We are exporting to ten countries and there are already 40 suppliers who are already doing this.

We would like to use synergies within the Alliance and want to continue this competitive level. We are fully integrated into the Renault-Nissan purchasing organisation [and] offer global growth and export opportunities for the best Russian suppliers.

JA: What do you expect from your suppliers? What opportunities do you give in return?

DC: We are building our capacity and we expect our suppliers to help that. We expect all suppliers' divisions to support us. What do we expect from our existing suppliers? The first thing is robust quality - next unconditional performance [while] shortages should be equal to zero.

Next, cost reduction and finally boost localisation: Tier 1 should be 80%, Tier N should be 50%. The supplier can expect from us: new business within the Alliance; volume increases; export opportunities and long-term contracts.

The purchasing director added the Alliance was also looking to localise engine and transmission production in Russia and is seeking government support to develop local suppliers. It is also inviting global suppliers to create joint ventures with Russia having competitive labour costs.

Russia's automotive fortunes have seen a considerable up-tick for the past year after 48 months of collapsing sales, with heavy pent-up demand and a generous government incentive package considerably stimulating the market.