Russia desperately needs world-class component suppliers to build its auto industry, but a challenging business climate and slow-moving bureaucracy make it tough to get them, according to a panel of experts on Russian trade.
In recent years, General Motors and Ford have done business in Russia. Ford, which last year returned after a 50-year absence, now is building the Focus in a factory near St. Petersburg.
The Russian factory turns out about 25,000 cars a year. Each model sells for $10,100 (E9,500). Experts on a panel at last month's SAE World Congress in Detroit agreed that that price is about the maximum that west Russians can spend for a Russian-built car.
The Focus cars are in such demand that there's a six-month wait for the vehicles, but the Focus is unique in Russia because of its quality and European styling. The demand doesn't extend to products of other new-vehicle producers in Russia.
The country is overwhelmed with the annual arrival of about 400,000 used Asian import cars, which typically sell for between $2,000 and $5,000, and of roughly 100,000 European new cars. Both types are brought into the country illegally against strong tariff and economic protection barriers. Among other effects, that means that on the Asian side of Russia cars tend to be right-hand drive, while on the European side, left-hand drive predominates.
New cars that are designed and built in Russia struggle in a market that gives more trust to imports than it does to the outdated technology and low quality of domestic cars, which sell for about $6,200 at the highest. The country's new-vehicle market is still near the 1 million mark annually, although demographics and current sales trends show that the market could sustain 2.5 or even 3 million vehicles.
"The industry is facing some very serious challenges," said Lova Khoram, a retired GM vice president for trade and the executive who brokered that company's entry into the Russian car market in the 1980s, when it sold pollution-control equipment to carmaker Avtovaz.