Russia’s Derways to Build Luxgen Cars, Eyes Own Model

VIENNA – Avtomobilnaya Kompaniya Derways, the Russian contract assembler based in Cherkessk, later this year will launch assembly of Taiwanese-brand Luxgen vehicles from complete knocked-down kits.

“For Luxgen we built a separate welding and assembly hall, where modern machinery from South Korea has been installed,” Mukhadin Derev, Derways executive director, tells the Expert Yug magazine in an interview.

Derev is a member of Derways’ owner-family, so it is not just a coincidence that the first three letters in his and the company’s name are the same.

The first Luxgen model to be assembled in Cherkessk, the capital of Russian Republic of Karachay-Cherkessia, is the Luxgen7 SUV.

“The Luxgen...has been certified in Russia and is ready for production,” Derev says.

The SUV will be followed by a multipurpose vehicle, the Luxgen7 MPV, which will be assembled on the same welding line. Plans also call for production of the Luxgen5 Sedan, which was introduced last year in Taiwan and launches in Russia next year.

“This year we plan to sell 2,000 to 2,500 (Luxgen) cars, while plans call for 10,000 units next year,” Derev is quoted as saying. “In the future, Luxgen is expected to account for at least 20% of our production.”

Derways negotiated with Taiwan’s Yulon Group, the parent company of Luxgen, about the project for two years.

The auto maker, which employs about 2,000 workers, currently assembles Chinese-made Geely and Lifan cars. Plans call for the launch of several new models this year: Derways will switch from the Geely MK to the modernized Geely SC6. The Lifan 530,updated Lifan Solano 620 and the larger Lifan 720 sedans will join the Lifan lineup as well.

Derwaysalso plans to resume output of Chinese Haima cars with the updated Haima3 and Haima2 models this year.

“The minimum target for this year is 70,000 cars, but I believe we will produce more, and next year we plan to produce about 100,000 cars,” Derev says of Derways. “In 2015 we will almost reach the designated capacity of the plant – we will make 120,000 to 130,000 cars.”

The local content of cars now made by Derways is low. Batteries, wheels, tires, fluids and oils are sourced locally. The company plans to increase localization efforts with large parts such as seats, instrument panels, bumpers and mufflers.

In addition to its activities as contract assembler, the South Russian auto maker plans to produce a vehicle of its own, working with Korean partners. “The prototype of our car currently exists in the form of drawings, but I think that process will become reality next year,” Derev says.

The auto maker already has experience in producing its own vehicles. Before taking on assembly of Chinese cars, it manufactured an SUV dubbed the Derways Cowboy in small volumes.

In addition to its factory in Cherkessk, Derways is considering a second production site in the neighboring Stavropol region. “From the administration of the Stavropol region we received the proposal to construct a plant on their territory, but there are no decisions today,” Derev says in the interview. “The question is still in the phase of consideration.”