“We believe in the re-industrialization of Russia,” Joe Krider, vice president of Developing Markets at heavy equipment manufacturer Terex, said during a panel discussion at last week’s Russia Business and Investment Summit (RBIS) in New York City. Krider discussed the prospects for the development of Russia’s transportation and construction industries alongside fellow panelists Brunswick Rail CFO Nicholas Pascault, Avtovaz Finance Director Oleg Lobanov and Russian Machines Vice Chairman Peter Koob, all of whom expressed bullish outlooks on the sector’s future growth. Below are some key insights from the panel:
Russian consumers are becoming more sophisticated
While the panelists acknowledged the challenges associated with doing business in Russia, they agreed that the country’s commercial landscape has become more attractive and competitive than it was 10 years ago. Most importantly, they highlighted the growing sophistication of the Russian consumer base as a key driver of market competition. “Russian consumers are expecting better quality products than ever before,” said Avtovaz’s Lobanov, adding that rising consumer spending power is boosting demand for better transportation and construction services as never before.
For example, Lobanov noted his company plans to launch 15 new car models in the next five years to satisfy growing demand; a dramatic change from its earlier average of introducing only one new model every five years.
The role of joint ventures in expanding the industry
Lobanov and Krider both touted joint ventures as being essential to Russia’s continued industrialization. Lobanov said Avtovaz is actively looking for foreign partners to help the company produce quality products for what could eventually become one of the “largest car markets in Europe,” while Krider discussed his company’s successful venture with Russia’s Gaz Group, a vertically integrated company with a “culture of lean manufacturing.”
Krider also emphasized the importance of picking the right partner, noting that Russia has many effective and efficient companies that could make great partners for foreign companies seeking to enter the market. By combining local knowledge with foreign technical expertise, such partnerships not only satisfy domestic demand but also have the potential of expanding abroad through exports.
Roadside infrastructure is essential
Most panelists, including Lobanov, agreed that the Russian government needs to continue its development of Russia’s road infrastructure to ensure that growth in the transportation sector stays strong. Third Millennium Russia Fund Manager John Connor, who moderated the session, said improved infrastructure could even lead Russia to develop a road-side culture like that in the United States, with everyday Russians taking weekend road trips to visit Sochi or other domestic vacation hot spots.
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