PCMA Rus says it is looking to existing suppliers in Russia to ensure competitiveness as manufacturers seek to take advantage of the ruble depreciation.
Russia has been beset with severe economic headwinds for several years as the international community vents its collective fury against what it sees as the annexation of Crimea and a potential presence in Eastern Ukraine, with economic sanctions and a dwindling oil price biting hard.
The subsequent effects of that situation – plus high inflation and difficulty in accessing credit – are starting to abate as the ruble recovers some of its lost ground and oil stabilises around US$50 a barrel – but there still remains some competitive advantage for domestic suppliers.
“It is widely known the goal of localisation is to reduce costs and protect product against currency,” said PCMA Rus head of purchasing department, Alexander Smolyankin at the recent Russian Automotive Forum organised by Adam Smith Conferences in Moscow. “The OEM always has the option to do that. You can take something off the shelf from an existing supplier or prepare your own production.
“Our strategy is to use the existing technological components of our suppliers with our engineering centre. The areas directly related [to] purchasing [are]: diversity [of] article integration, purchasing efficiency, Tier 2 localisation and export.
“Exports would allow us to reach a new level of production. One of the [other] priorities is the reduction of logistics costs generated by suppliers from Latin America and China. Our goal is to reduce the amount of items supplied by sea and we have certain developments here with our existing suppliers.
“Export opportunities offer new possibilities for suppliers, new production, so how does that affect the supplier? Working hours are reduced and overheads go down as well. We have localised suppliers already who supplier parts to the European market. We also have a supplier who is going to supply car parts from Russia for new models.
“We also provide the opportunity to increase volumes in our suppliers if the purchasing ratio is good. During the last year we did quite a good job and appointed 23 new suppliers from the Moscow region to the Volga region.”
PCMA Rus adds it has reached around 35% localisation and is looking to attain 40% domestic production, as it looks to address the “biggest part of the cost”, namely transmissions and engines. “Here we can reduce the cost of certain parts in terms of chassis,” added Smolyankin. “We will soon get new chassis elements, for instance suspension, already localised.”
However, the Russian-based manufacturer remains fully aware of the intense competition lurking outside its borders and as the ruble starts to slowly appreciate.
“European suppliers do not sit idle and reduce their labour costs,” noted Smolyankin, adding: “Western Europe is quite competitive and Eastern Europe is competitive against Russia in terms of process.
“The level of article integration may affect the whole situation a lot. The more productivity we get from a supplier, the better added value.”
PCMA Rus is the joint venture between PSA Peugeot Citroen and Mitsubishi Motors.