GM in Russia: Too Few Cars is a Good Problem to Have
August 25, 2008
By Pal Negyesi
MOSCOW - General Motors has the kind of problem in Russia that automakers love to have
anywhere: too few vehicles for demand.
The shortage of vehicles in this booming market, where people in the commodity-rich region are rushing to spend their new-found wealth on vehicles, was mentioned repeatedly by executives and dealers representing GM. Like other manufacturers, GM is hosting media, including AutoObserver, at this week's Moscow auto show and giving them a glimpse of their growing manufacturing and distribution presence in Russia.
Too few vehicles cost GM first place in Russia among imported brands in the second quarter. "We ranked first (in sales) in the first quarter of 2008, but we couldn't get enough cars in the second quarter. That's why we are second," Jacek Gorski, GM's sales director of GM Russia and Central Europe.
Indeed, Moscow's streets are bustling with automobiles. It's a Mecca for car buffs. Gone are the days, when old Avtovaz models dominated. The latest offerings from Ford, Mitsubishi, Chevrolet, Toyota, Hyundai and BMW cram Russian streets with Chinese cars and such oddities as the Iran Khodro Samand and the Nissan Almera Classic - a fresh import from South Korea's Renault-Samsung - thrown in. Interspersed are still a few of Russia's own Avtovaz-produced Lada cars and GAZ minivans, which are mainly used by banks as cash carriers, by police officers and by local authorities as "marshrutkas," a sort of scheduled minibus service.
GM Enhances Russian Presence
GM's presence in Russia has been growing and promises to gain more prominence, with the intent to beef up its supply of vehicles to Russians.
GM bought out the ailing South Korean Daewoo operations and re-launched the brand as Chevrolet in Europe three years ago where the automaker has gone from selling 342,190 vehicles in 2006 to 457,807 in 2007. For the first half of 2008, GM sold 266,200 Chevrolets in Europe.
In Russia alone, GM sold more than 125,000 Chevrolet-branded vehicles in the first six
months. The Chevrolet Lacetti, a former Daewoo model known as the Suzuki Forenza in the U.S., is No. 1 among the top 20 selling foreign models in Russia.
Chevy's local product mix is more colorful than anywhere else in Europe. Here Korean-built models are joined by the old Lanos being built in Ukraine, the Niva off-roader being built by a GM-Avtovaz joint venture in Togliatti and a few full-size SUVs like the Tahoe and TrailBlazer direct from the U.S.
GM's Opel brand is enjoying major success in Russia as well. Young urban professionals tend to choose trendy cars including stylish models from Opel. So far this year, both the Opel Astra and the Opel brand in total are ranked among the Top 20 selling models - a first for the German brand.
GM's joint venture in Togliatti sells as many Chevrolet Niva off-roaders as it can build. GM also cooperates with UkrAvto in Ukraine, which supplies about 50,000 Lanos models a year to Russia, and Avtotor in Russia, which currently assembles about 50,000 Lacetti models a year.
Avtotor will open a dedicated assembly plant next month to enable the Kaliningrad-based operation to churn out more Lacettis. GM also will open its own plant in Sushary, a suburb of St. Petersburg where the Captiva SUV and its Opel sibling, the Antara, will be built. Next summer, the new Cruze will join those models - and GM hopes the Lacetti/Cruze duo will be able to strengthen Chevrolet's position in the midsize car market.
Next week GM takes control of a former Daewoo plant in Uzbekistan. Roughly half of the production output of more than 150,000 cars a year at the UzDaewoo operations, now called GM Uzebkistan, are sold at the Uzbek market. Beginning in 2009, the local Daewoo network will be re-branded to Chevrolet, further boosting the performance of GM's best belling brand. The Uzbek plant will be upgraded by 2011 and will also serve the fast-growing Russian market with a new model, developed specifically for this region.
GM vehicles are sold in modern dealerships like Genser, the multi-brand Moscow dealership toured by journalists on the eve of the city's auto show. Opened in 2006, the dealership sells between 600 and 800 cars a month, from the $10,600 Chevrolet Lanos to the Cadillac Escalade costing 10-times as much.
Genser Sales Director Nataliya Ignatova said the dealerships' biggest challenge is the lack of enough vehicles for car-hungry Russians. Some models have a six-month waiting list. And consumer desire for more expensive cars is growing. Ignatova said Opels loaded with equipment and bearing sticker prices averaging $23,000 to $24,000 are particularly popular.
Pal Nagyesi is a Budapest-based correspondent for Edmunds.com who is covering the Moscow auto show.
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