Volkswagen Rus is looking to ink more deals with domestic suppliers

Volkswagen Rus is looking to ink more deals with domestic suppliers

Volkswagen Group Rus says it "learned" from the crisis years not to rely too heavily on imported components as a weak rouble made shipping in parts uncompetitive.

Russia is trying to square the circle of a low rouble making domestic production more attractive, particularly for export potential, but at the same time raising quality to that of overseas components and has had some success in the field as competencies are increasingly sourced at home.

"After some years of depression we have a turnaround especially in the second half of last year with volume up 20% - maybe back to the level of pre-crisis in 2012/2013," said Volkswagen Group Rus purchasing director, Patrick Huseman at the recent Russian Automotive Forum organised by Adam Smith Conferences in Moscow.

"We believe in the Russian automotive market and the recovery of the Russian economy. During the crisis we learned high dependency on imports of components has almost broken our neck, because prices in Russia could not increase as fast as the exchange rate. Sometimes we were selling cars with almost zero margin.

"That is why we are trying to increase localisation. In the past our main focus was with conventional plastic parts and now it is concerned with localised high-tech components; electronics, chassis parts [for example] to enlarge our variety of products. Therefore it is essential to develop Russian suppliers because there is currently not all product available in Russia.

"Not all Russian suppliers fulfil our requirements so this is an effort to increase the potential of localisation. We call it within our company, regionalisation, which means our headquarters gives responsibility to us; we will increase our technological capability in order to be near the domestic market."

Volkswagen is in discussions with Russian suppliers in areas such as clutches, HVAC systems and radiators among other segments and is running a series of tenders. The automaker is also "learning" to localise most of its granulate needs.

"Stainless steel is always a problem," added Huseman. "That is something we can all do together with the government to increase capabilities.

"[There] is always a very long process to homologate models and finally in most cases we succeeded because we did a good job and our Russian partners did a good job."