The race is on as Western carmakers gear up investments in Russia ahead of new government policies to help attract foreign direct investment in Russia. Business executives, including Renault CEO Carlos Ghosn and Nissan Executive Vice President Colin Dodge, are calling Russia a “priority market” and predicting that Russia will overtake Germany as a top market.
“For me, it looks like Russia is normalizing and coming back... it seems like something fundamentally good is happening in Russia and people are buying cars again,” says Nissan’s Dodge in Reuters.
Renault’s Ghosn echoes Dodge’s belief in The Moscow Times, stating that Russia's auto market has the “biggest potential” and that it “has bottomed out and we should see a recovery.” Ghosn compares the recovery and anticipated growth in the Russian market to Europe, stating that European demand will fall 10 percent.
Supporting these statements, Ghosn recently announced Renault’s increased investment in Russia, including the doubling of its production capabilities, the launch of its low-cost Sandero compact car and a potential 25 percent increase in its stake in Russian Lada maker AvtoVAZ.
“This shows Renault’s confidence in the development of the Russian car market, and in the potential of this market and our aim to be among the leaders of the market,” says Ghosn in The Associated Press.
In fact, both Renault and Nissan have partnered with AvtoVAZ and anticipate winning (as a partnership) as much as 40 percent of the share in Russia's auto market by 2014-15, which, according to Dodge, is a “reasonable” and “feasible” estimate.
Renault’s investments in Russia are expected to pay off, says CEO Ghosn in a Reuters piece. Ghosn cites a restructuring at AvtoVAZ and the Russian government’s measures to support consumption that could help the sales of small cars.
As Ghosn mentions, the Russian government is actively promoting the growth of the automotive industry by arranging meetings with Western car company CEOs and executives, and using measures like the cash-for-clunkers program to stimulate demand. A transcript of Prime Minister Putin and Ghosn’s March 1 meeting can be found on the Prime Minister’s website.
Analysts are also encouraging foreign investment. IHS Global Insight analyst Tim Urquhart urges investors to “get in now” and PriceWaterhouseCooper recently issued a report that predicted Russian car sales will rise as much as 15 percent in 2010, despite the industry’s previous downturn in 2009. Even the director of the European Chamber of Commerce stated that after a 50 percent fall last year, the “Russian market will experience a modest growth this year.”
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