The upward trends in the Russian economy and the automotive market. The recovery of the Russian economy with 1.5% GDP growth in 2017 lifted the Russian automotive market. With 1.74% growth in 2017, the Russian market showed a sustainable trend towards further development in all the segments of the automotive manufacturing industry.
The LCV segment lacks local component manufacturers. The passenger and light commercial vehicles is the major segment, representing 88% of the total cars production volume in Russia. Considering the size of this segment, that it has the lowest localization of car manufacturers (about 32% to 62%), and that the government pushes for further localization, it is very interesting for new components manufacturers to start a new production on the Russian territory. Low localization levels create market niches for stamping, welding and painting of body details, gearboxes, engine and cylinder production, piston groups, crank shafts, telematics systems and electric motors for example.
New perspectives in the agricultural and special-purpose machinery segments. Half of the machinery for the agricultural segment is still imported, foreign machinery accounted for 50% of the total Russian equipment in 2017. The share of foreign imports was particularly high for tractors (67.8%), and still accounted for 22.1% of their combine harvesters and 20.7% of their forage combine harvesters. At the same time the majority of the park age is over 10 years old, the production of Russian equipment is increasing but levels of localization are low and Russian agricultural exports are expected to double by 2025 compared 2017 and reach sales about USD 242 million. The sector will require new manufacturers, especially Tier 1 manufacturers for the Central cluster. The overall agricultural machine building sector will need to develop new local components production for lighting, axles, drives electronics for example.
Foreign solutions are needed to tackle Russian automobile sector’s systemic issues. The Russian automobile industry is partly characterized by the narrow range of products and the underdeveloped modern components, the heavy wear of production facilities and the low human resources potential. The automotive industry production facilities wear is about 55% and there is a need to replace outdated and worn out vehicles, as well as part of new vehicles because of harsh climatic conditions, intense corrosion that induces frequent maintenance and increased requirements for car comfort and safety.
The Russian governmental support strategy based on stimulating competitivity. The government is planning to switch from subsidies aiming at supporting the demand to a long-term stimulation of the industry’s competitiveness. An annual subsidy of 50 billion rubles (USD 814 million) until 2025 will be allocated with potential changes aimed at developing projects related to electric cars, remotely piloted vehicles and infrastructure development for their exploitation. This is an opportunity to benefit from State support for components production and also to be among the first local manufacturers in the electric car industry that is not developed in Russia yet.
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