The French carmaker Renault plans to double its car production in Russia and make Logan one of the three bestselling cars in the local market by 2009. With an investment of $150 million, Renault is aiming to increase the capacity of its Moscow plant to 160,000 Logans a year, and capitalize on the soaring demand for its budget car in one of the fastest growing car markets in the world. The investment is also expected to add some 1,000 new jobs to the current 2,400 people employed by the existing operations.
Renault is currently one of ten global carmakers who assemble cars in Russia in order to capitalize on the soaring demand for new cars, but according to a recent report by the independent market analyst Datamonitor, the number of locally assembled foreign brands is likely to double over the next five years.
“The Logan is a perfect pitch for the Russian new car market, at least from the perspective of a volume carmaker,” says Jugoslav Stojanov, an automotive analyst at Datamonitor and author of the report titled Russia’s Car Market: Runaway demand for foreign autos and services. “It is a relatively modern product, of relatively good build quality and at an affordable price. It is positioned to attract new car buyers who can just about afford to buy a new car more expensive than the domestic-made Lada, and the number of those people in the country is growing. The rising wages of Russians play an important role, but more importantly, there is the developing market for consumer credits and leasing,” says Stojanov.
According to Datamonitor, Russia’s new car market grew by 28.5 percent in 2006, selling 1.8 million units, more than half of which were non-Russian brands. Renault was the sixth bestselling foreign brand, with just over 72,000 units, behind Ford, Chevrolet, Hyundai, Toyota and Nissan. The bestselling brand in Russia overall remains the domestic Lada, product of the company Avtovaz, which sold just over 740,000 new cars.
Datamonitor’s report, which also provides projections of the Russian automotive market till 2011, finds that cheap cars costing less than $10,000 account for a significant share of Russia’s car market. However the report expects there will be a gradual shift towards the end of the decade. “By 2010, the entry-level cars in Russia will almost certainly cost $10,000, which is very different from the current $5,000 price tag of a Lada saloon, based on pre-1970s technology”, says Stojanov. “It is the cheapest models of Lada that captured some 12 percent of the new car sales last year, but this is not sustainable in the longer term. Those products don’t comply with any present-day industry standards in terms of emissions or safety and, most importantly, don’t even make money for Avtovaz, which will need to drop them from the range by 2010, replacing them with better and inevitably more expensive vehicles.”