"We are always looking for opportunities to localise parts in Russia" - PCMA-Rus general manager, Jean-Christophe Marchal

"We are always looking for opportunities to localise parts in Russia" - PCMA-Rus general manager, Jean-Christophe Marchal

PCMA-Rus is a joint venture between PSA Peugeot Citroen (70%) and Mitsubishi Motors (30%) in the Kaluga region of Russia, some 100 miles south west of the capital. PCMA-Rus general manager, Jean-Christophe Marchal, spoke to Simon Warburton at this week's Russian Automotive Forum in Moscow.

The EUR550m (US$718m) plant inaugurated in 2010 allows for CKD production of four models: the Peugeot 408 launched in July, 2012 and Citroen C4 Sedan launched in April, 2013. For the SUV lines, a new Outlander was launched in December, 2012, while the Pajero Sport will start this summer.

The plant's full capacity will be 125,000 vehicles per year, with production of the Peugeot and Citroën C-segment cars amounting to 85,000 models and the remaining 40,000, for Mitsubishi SUVs.

j-a: Can you identify any model trends in Russia at the moment you can capitalise on?

J-MC: Things are changing and slowly, but they are changing. There seems to be a new trend for hatchback cars. SUVs will probably remain a trend.

j-a: What are some of the challenges working in Russia?

J-MC: The size of the country does not help and the climate does not help to find a network as good as Europe, but thanks to government policy, things are changing now.

Roads are improving - for example a road between Moscow and Kaluga is a very good [one] - which you can compare to a European one. People really want to have a car in Russia - they really need it and because of the distance between towns and cities.

Most Russian [people] have a dacha and you need a car.

j-a: How can Russian consumers access credit to purchase vehicles?

J-MC: As time goes on, things are changing and Russian needs are becoming closer to European market needs.

The credit situation in Russia is a key point because the [interest] rates are not so low [Russian Machines, GAZ Group parent, chairman, Siegfried Wolf, also highlighted Russia's high rates noting recently at a just-auto visit to Nizhny Novgorod: "We have to get competitive rates, Russian banks need to get money into areas where we need it.

["9%, 10%, 11%, interest rates, we can not be competitive. On an international basis, it is 4% and I am going to compete with this? This is my biggest issue"].

Some companies have created subsidiaries of banks for customers - PSA is in this business with Banque PSA Finance.

j-a: Decree 166 by the Russian government mandating local content appears here to stay - what is your view?

J-MC: We had to find some suppliers and all our suppliers in Kaluga are global players. All of them either had new factories or decided to create new factories. For the time being, we have not been able to make business with pure Russian players.

However, it was one of our targets at the beginning of the project. Our desire is to improve the localisation rate because there is no reason not to find a win-win deal.

The key point is we do not want to negotiate on quality. We can help them to improve their standards of quality. We are always looking for opportunities to localise parts in Russia instead of having to import from Europe or other parts of the world.

If you can find tomorrow a supplier that is able to respect these targets, it could start in a few months.

j-a: Do Russian consumers view overseas suppliers' involvement in providing components for vehicles as important in a purchase?

J-MC: I am not sure the customer has in mind who is the supplier. My strong feeling is what is important for the supplier is [the customer] to buy a car made in the European way, which is a kind of guarantee.

j-a: How would you categorise the PCMA-Rus dealer network?

J-MC: PSA has developed our network in Russia and for the two brands, we have nearly 150 dealers. We consider we cover appropriately the Russian territory.

One of the biggest challenges in Russia is logistics. I suppose it is one of the characteristics of big countries and as Russia is the biggest country in the world, you can imagine.

[Russian Railways (RZD) recently inked a contract to acquire 75% of PSA Peugeot Citroen's logistics subsidiary, GEFCO, for EUR800m that will be used to pay down the automaker's debt].

Following the launch of full-scale production and three new workshops - welding, painting and assembly - the number of plant employees was slated to rise from 1,700 to almost 2,500 by the end of 2013.

"Operation of PCMA Rus favours multi-sided development of our region and moreover, provides the economy of the region with contemporary job [s]," - said Kaluga region governor, Anatoly Artamonov.

"I estimate positively the fact there is an enterprise in our region, [for whose] products [there is] demand across Russia."