Blog: Dave LeggettRussia seminar

Dave Leggett | 15 June 2007

I spent yesterday at Frost & Sullivan’s Russia seminar in London. It was a useful day. You can read some of the highlights via the below link. Bottom line, Russia is a relatively tough and risky place but the returns are potentially pretty sizeable. An awful lot of old bangers will need replacing and market growth prospects look pretty good.

A ‘growth workshop’ in which we split into three teams to consider the relative merits of investing in Central Europe versus Russia based on scoring factors such as ‘strategic attractiveness’, ‘financial attractiveness’, ‘implementation difficulties’, ‘risks’ and ‘stakeholder acceptability’ was interesting.

It provided an insight into what consultants might do when invited to present to boards and help the decision-making process. Anyway, all three groups came to the same conclusion with scores almost identical. Russia scores high on volume potential and stakeholder acceptability (as a ‘BRIC’ the boardroom might want to be active in Russia). But implementation difficulties and risk are where Russia falls down.

Central Europe is a better bet, for now. Russia is riskier and more problematic, but the returns would be potentially bigger, too.

Walter Schoepf, Bosch’s OE sales rep based in Moscow, gave us an interesting presentation on safety. Obviously, Bosch sees potential for its systems in the Russian market, but the ‘safety culture’ there is a weird one.

No-one wears seat belts, apparently, at least in Moscow. Wearing seat belts in cars is mandatory but people simply refuse to wear them. The police don’t either and they don’t enforce the rule. A lot of people die on Russia’s roads. Fatality risk per vehicle is 1 death per 6,400 vehicles in the EU. In Russia it is just 1 in 995. China is 1: 1,300, Japan 1: 13,000.

And get this. The risk of fatality in Russia is there for any sort of injury that requires rapid medical assistance. Ambulances have trouble getting through the traffic in cities and outside the cities cover is sparse. Many people who are injured in traffic accidents die of blood loss or simply freeze to death.

What will car buyers in Russia be prepared to pay for in terms of safety? Not a lot, I would think.

Over a glass of beer at the end of the day I asked Walter about life in Moscow. He said the traffic is bad, but he likes the place. What about security? I asked. Can you walk around the city?

“No problem,” he said.

“Moscow is a very safe place. There are some places that you shouldn’t go, but it is the same in Stuttgart,” he added.

UK: Seminar highlights Russia opportunity as well as structural problems


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