GAZ Group says the current rouble devaluation allows it to take advantage by competitively exporting commercial vehicles with improved warranties compared to similar foreign products.
Russia is currently beset with economic challenges, but Nizhny Novgorod-based GAZ, in common with other home automakers and component producers, is able to take advantage of exchange rates to make it more competitive.
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“It would be stupid to develop new products for the Russian market alone,” GAZ CEO, Vadim Sorokin told just-auto on the sidelines of the recent Russian Automotive Fourm in Moscow.
“We produce not only GAZ brand vehicles but also Mercedes-Benz Sprinters. Still we are able to keep this large share of the LCV market with our price position, which is 15%-20% cheaper.
“Even this price gap is not the decisive factor for customers – they are looking for more functionality. Even with selling 15%-20% cheaper, we are offering our customers much better warranty terms [for example].”
GAZ cites its Next warranty of 36 months or 150,000km compared to overseas competitors who offer 36 months with 60,000km or 24 months with 100,000km.
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By GlobalDataThe GAZ chief noted the Group’s export drive had seen the number of overseas markets almost double from 16 in 2013 to 30 last year, although this currently does not include the European Union, whose “protected” steep customs duties make its products expensive.
“Europe would be an interesting market for us, but it is very difficult and very competitive,” said Sorokin. “It is very well protected also. For us the customs tax, if you were to sell to Europe would be 22%.
“For European vehicles into Russia they are only charged 10%. Nonetheless Europe is very important because it dictates requirements to the LCV market and we need to build it into our new products.”
Sorokin added GAZ was looking to expand its assembly operations in Turkey from 30% localised content to 50%, while the Group is also evaluating Soviet legacy markets such as Vietnam “even though they have almost 80% import tax.”
GAZ is also studying Egypt, despite its 40% import tax, while Cuba is also a possibility for assembly, with exports to neighbouring countries.
“We see it is part of our long-term strategy to sell not only the finished products in export markets but to provide all the required service prior to that,” said Sorokin. “We must absolutely be very cautious because it is not spaghetti we are selling.
“We are selling a life-cycle product – it is product aftermarket, support, maintenance. The easiest thing is to come in, dump the goods and get lost.
“If you look back ten years, there were numerous Chinese companies rushing in with their cars to Russia, but then they were out after one year because there was no follow up.”
To emphasise the point of localisation, GAZ has set up GAZelle Next SKD assembly operations at the Mersa Otomotiv plant in Sakarya, 150km from Istanbul.
Key components and systems of the vehicles are delivered from Russia while some parts, such as propeller shafts, wheel discs, batteries and braking system elements, are purchased from Turkish manufacturers.
Some 24 dealer centres and 38 certified service stations have been established in seven regions of the country.
GAZ also recently inked a distribution agreement with Eastern European company, Verano Motors, to sell GAZelle Next light commercial vehicles in Serbia, Montenegro and Macedonia as well as Bosnia and Herzegovina.
Sales of the Euro-5 GAZelle Next LCVs are planned in nine dealer centres. Verano Motors will also sell AWD GAZelle Business and Sobol Business vehicles.
Verano Motors is a part of one of the major Balkan groups, Verano and has been the official dealer of Peugeot in Serbia, Montenegro, Bosnia and Herzegovina since 1996.
