Subscribe to a WardsAuto newsletter today!
Get the latest automotive news delivered daily or weekly. With 5 newsletters to choose from, each curated by our Editors, you can decide what matters to you most.
Chinese Automakers Eye Direct Investment in Russia
While Chinese automakers accounted for only about a 3.3% share of Russia’s LV market year-to-date, their plans for growth in the country are ambitious.
4 Min Read
Great Wall plans annual output of 150,000 Haval vehicles in city of Tula.
VIENNA – Chinese automakers are pressing on with plans to manufacture cars in Russia, despite the country’s economic problems and recent decline of car sales.
Lifan will begin constructing a new assembly plant in the city of Lipetsk in March. Chairman Yin Minshan and Oleg Korolev, governor of the Lipetsk region, signed an agreement earlier this month under which Lifan will invest RR12.7 billion ($300 million) in the factory, which will include welding and painting shops. Annual capacity will be 60,000 vehicles, some of which will be exported, in the first phase.
The Lifan plant will be the second Chinese-owned car manufacturing facility in Russia. In August, Great Wall laid the foundation for its plant in Uzlovaya Industrial Park in the Tula region, 24 miles (40 km) from the city of Tula and 108 miles (180 km) south of Moscow.
Great Wall will invest RR12 billion ($284 million) in the first phase of the plant and altogether will invest a total of RR18 billion ($426 million). It will produce vehicles under Great Wall’s Haval brand, with planned annual output of 150,000 units at full capacity.
“Great Wall will create in the Tula region a full cycle of production cars, including the manufacture of engines and transmissions,” Governor Vladimir Gruzdev says in a statement. “Our land will be the place where not only famous Tula weapons, gingerbread or samovars are made, but also Tula-made cars.”
Russia is among Great Wall’s first and largest export markets. In 2013, the Chinese automaker exported more than 20,000 units to Russia.
Twelve Chinese light-vehicle brands sold only 58,563 units in Russia through September, down 20.4% from like-2013. Lifan was the best-selling brand with 15,842 deliveries, followed by Geely, Chery and Great Wall.
While Chinese automakers accounted for only about a 3.3% share of Russia’s LV market year-to-date, their plans for growth in the country are ambitious.
Assembly of Chinese cars in Russia is not new. Contract assembler Derways builds Brilliance, Chery, Geely, JAC, Lifan and Hawtai vehicles from completely knocked-down kits at its plant in Cherkessk. Great Wall importer Irito Group operates CKD assembly of some models at its sites in Gzhel near Moscow and Lipetsk.
Russian companies including Avtotor or TagAZ built Chinese cars in the past.
The new development is that automakers such as Great Wall and Lifan are investing directly in wholly owned factories.
Great Wall has been considering a Russian plant for long time. The Chinese automaker last decade was planning a plant in the republic of Tatarstan, but it shelved the project because Russian government policies favored investment by automakers from other parts of the world. Now, as a result of the changed political situation, the government is supporting Chinese investments as it tries to establish closer ties to China.
In addition to Great Wall and Lifan, other Chinese car projects in Russia are in the negotiation phase:
Chery is interested in buying bankrupt assembler TagAZ, according to government officials in the Rostov region. Alexander Grebenshchikov, vice governor of the region, tells local media Chery representatives visited the factory earlier this month to conduct a technical audit. TagAZ assembled Hyundai vehicles and several Chinese brands from CKD kits in the past.
There is no information about Geely’s plans for its own plant in Russia. However, the automaker operates a small SKD JV plant and plans a larger CKD facility in Belarus. Geely also signed an agreement on semi-knocked-down and CKD assembly at the AgromashHolding plant in Kostanay, Kazakhstan, this month. Both Belarus and Kazakhstan belong to a customs union with Russia.
Russian’s Alabuga Motors plans to establish a joint venture for the assembly of Dongfeng cars and possibly other brands at a site in Elabuga in Tatarstan. Assembly may start with SKD kits in 2015 and switch to CKD two years later.
Russkiye Mashiny (Russian Machines), parent company of vehicle manufacturer GAZ, and China North Industries signed a memorandum of cooperation in May. While the main objective is common production of heavy trucks, the companies also are discussing production of a new Chinese car brand in Russia.
Authorities in the Kurgan region are in negotiations about the construction of a plant for production of an unnamed brand of Chinese cars.
Chinese automakers such as Haima, Hawtai or GAC Gonow are considering Russian assembly projects as well.
In addition to sedans and hatchbacks, some Chinese brands also offer CUVs, which are increasingly popular in Russia.
‟Cheaper Geely models are competeing against Lada or Daewoo cars,” Igor Ovsyannikov, managing director of Geely’s Russian distribution subsidiary, tells WardsAuto. ‟Customers who were considering to buy the Geely Emgrand EC7 crossover but changed their mind are mainly going to Nissan, Hyundai or Kia.”
About the Author(s)
You May Also Like
