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March 21, 2017

Russian manufacturing quality “high” but a way to go – AEB

Russia's Association of European Businesses (AEB) Automotive Manufacturers Committee (AMC) is cites the "extremely high" quality of assembled vehicles for export, but concedes there is a way to go before Western international acceptance becomes widespread.

Russia’s Association of European Businesses (AEB) Automotive Manufacturers Committee (AMC) cites the “extremely high” quality of assembled vehicles for export, but concedes there is a way to go before Western international acceptance becomes widespread.

A major theme this week at the Russian Automotive Forum organised by Adam Smith Conferences in Moscow, was how to build the image of ‘Made in Russia,’ using domestic suppliers to increase quality for export, but already shipments overseas are increasing as the AEB made clear.

“When it comes to Western Europe, people will look at anything produced in Russia with the same eyes they would look at China, but the assembled quality is extremely high, it always has been,” AEB AMC chairman, Joerg Schreiber told just-auto at the Mazda headquarters in Moscow, where he is also president and managing director of the automaker’s operations in the country.

“I know exports have increased from a very low level to a respectable level – a few 10,000s in total. Especially with the depreciated ruble to help improve profitability of exporting.”

Closer to home the AEB AMC has been compiling a gloomy series of statistics for several years now, charting the steep decline of the Russian market as it battles against the strong headwinds of low oil prices, high inflation, international economic sanctions and a weakening currency.

But at this week’s Automotive Forum and from general economic data, there was genuine optimism the worst may be over with a slowly appreciating currency, falling inflation, down to 5% now and government support measures stemming the hitherto catastrophic sales falls to somewhere around 5% last month. However, there is still inbuilt caution when it comes to big ticket purchases such as cars.

“How can it be if the ruble is so heavily depreciating, people don’t storm the shops?” added Schreiber. “People are afraid, so they put it [money] into something valuable. “[Some] Russians maintain more than one ruble account, they [also] have a dollar account.

“Banks offer this type of multi-currency product to customers. If the ruble appreciates [however] we see restraint. From a retail perspective it is better year on year – the ruble has been stable for such a long time [currently US$1 = RUB57].”

Russia’s Export Centre (REC) says there will be an increase in the amount of financial support available to automakers this year, using the Decree 905 mechanism for companies looking to conduct business abroad.

The Kremlin has enacted Decree 905 to encourage Russian manufacturers to search overseas for export opportunities, as the home market continues to present major sales challenges, with 16 automakers taking advantage of the US$345m available for export initiatives last year.

Russia saw full-year sales of passenger cars and light and medium commercial vehicles reach 1.42m units last year, 11% below the 2015 result of 1.6m.

Four years of consecutive decline have seen the market lose 50% volume.

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