Marcus Osegowitsch is general director, Volkswagen Group Rus and Simon Warburton caught up with him on the sidelines of this year’s Russian Automotive Forum organised by Adam Smith Conferences in Moscow.
At the Forum, Osegowitsch received the award for Automotive Executive of the Year 2013 for playing a major role in making Volkswagen Group Rus the leading automotive company in Russia in terms of revenue for the second consecutive year.
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The Russia general director implemented one of the largest investment programmes in the Russian automotive industry and participated in shaping the legislative environment.
j-a: Russia’s automotive market experienced a challenging 2013 with falling demand – what is your expectation for this year and does the current tension between Moscow and the West affect your outlook?
MO: 2013 was a difficult year, but honestly if you look into [the] market, it started in 2012 being more difficult. 2014 is a very difficult one to predict. In Russia in 2014, the Olympics gave a positive push.
We think it will be 2.3m to 2.4m [units] if the rest of the economy keeps stable. You don’t know what is happening in the East/West confrontation right now.
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By GlobalDataWe gave more than 4,000 cars to the Olympic Games and it was a pleasure to see how Sochi was ‘Volkswagenised,’ ‘Audiised’ and ‘Skodaised.’
j-a: To what extent do you rely on domestic or overseas suppliers for Volkswagen in Russia?
MO: AS most automotive companies, we are all still heavily dependent on a global network of suppliers, which is euros and dollars [and] which became 25% more expensive. We have to price that into the market.
j-a: To what extent does government mandated localisation play an important part in your business thinking?
MO: It is really a textbook example of how to develop an industry. All foreign manufactures are here and it is a great achievement. As a government you try to come up with some regulations because you want to achieve something.
In terms of localisation, we have discussed it with the Russian government. Of course there is a long way to go. That is the beauty of working in Russia, because the government is working very businesslike, sometimes very spontaneous.
The way of government here is a bit spontaneous, which we don’t have in the West, that has its advantages and disadvantages.
We have succeeded in bringing a lot of western suppliers to Russia. We would encourage more Russian suppliers to really engage strongly with us.
j-a: Are you concerned the Ukraine/Crimea situation could affect business?
MO: The recent tensions have nothing to do with the short-term development of the market. We have seen a steep increase in the exchange rate. One thing Russians have learned for many years, is how to react to changing exchange rates.
Of course now, Russians expect price changes. What we see now is just something that pulls forward Q3 sales.
j-a: How would you characterise industrial relations for the Volkswagen Group in Russia?
MO: In Russia, we have in fact three unions representing workers and the relationship is very good. We have just a year ago negotiated a very comprehensive contract with all three unions.
Part of the agreement we struck with the unions is we form a Works Council [but] Volkswagen forces nobody in the world to join a union.
J-a: Do you find customers specifying German-manufactured models rather than domestic ones?
MO: Sometimes you hear from customers they would rather buy German-produced cars rather than Russian-produced cars, but you can’t really differentiate any of our global production sites.
Volkswagen Group Rus brings together seven brands in the Volkswagen Group that are available on the Russian market – Volkswagen, Škoda, Audi, Volkswagen Commercial Vehicles, SEAT, Bentley, and Lamborghini.
In 2013, the company’s sales in Russia reached almost 300,000 vehicles, of which 188,000 were produced domestically.
Starting in November, 2007, Volkswagen Group Rus has been manufacturing automobiles in Kaluga, 170km southwest of Moscow.
In October, 2009, the plant celebrated the official launch of its full cycle production in a ceremony attended by Vladimir Putin and other top government officials. In June, 2011, Volkswagen Group Rus and GAZ Group signed an agreement for the contract assembly of Volkswagen and Škoda vehicles at the GAZ plant in Nizhny Novgorod.
With total investment of some EUR1.3bn (US$1.8bn), the company has become one of the largest investors in the Russian automotive industry. The Group will be investing a further EUR1.2bn in Russia up to the end of 2018.
The company also this week opened a EUR14m canteen and provides free lunches for staff as part of a social benefits package, which also includes private health insurance schemes, subsidies for purchasing a new car produced at the Kaluga plant, financing for property purchases and a transport service to and from the plant.
