A growing number of carmakers are announcing the expansion of export supplies from their production sites in Russia because of the dramatic drop in sales on the domestic market. Following the announcement earlier this month that Kia was exporting from its St Petersburg plant its sister firm Hyundai has also now announced plans to export. Japanese carmaker Nissan has also announced it will develop export sales from its plant, also in St Petersburg.
“Hyundai is considering the possibility of expanding the geography of exports of cars produced in St. Petersburg,” stated the general director of Hyundai Motor Manufacturing Rus Choi Dong Yel. “However, this requires some certainly on state support, particularly in terms of transportation, reduction of customs duties and creation of logistics links.”
Some assurance has been given by the government already. The vice governor of St Petersburg, Mikhail Mokretsov, said the state would encourage carmakers to develop export supplies to ensure that they continue the implementation of growth programmes in Russia. Negotiations are currently being held over measures that could see the authorities subsidising transport costs for cars, as well as part payment of customs duties.
Until then regional authorities are encouraging locally-based carmakers and spare parts producers to join their forces as a means of decreasing the logistics costs of export supplies.
Hyundai already exports cars to the CIS countries but is expected to go beyond the CIS region in the near future. Demand for cars and components produced in Russia could increase, particularly in Europe, given the recent drop of the exchange rate between the euro and ruble and the corresponding fall of the cost of production.
Mokretsev also pointed to an initiative for carmakers in Russia to work in cooperation with large international OEMs.
"This would mean that Russian enterprises would receive competitive advantages in the global market,” said Mokretsev. “Today, the federal and municipal authorities are jointly working to support exports of automotive components and finished vehicles. Such exports are already taking place from production places in St. Petersburg.”
Mokretsev added that a number of logistics companies have entered into negotiations with carmakers and parts makers to launch supplies to CIS countries.
“At the moment the possibility of developing export supplies is evolving with Hyundai and Nissan," he said. “The representatives of named companies confirmed their intention to develop exports in 2015.”
Nissan confirmed that it was looking at the development of exports given the current sales situation in Russia.
“While there is a correction of volumes in Russia, we will pay more attention to the development of export of cars and components,” said the CEO of Nissan Manufacturing Rus, Dmitry Mikhailov. “We will spend time and energy to open the borders, which will ultimately give Russian market more stability."
"This year we may become part of the global automotive industry, as our product will be in high demand outside Russia added Mikhailov. “And it is noteworthy that we are talking not only about cars, but also about components.”
The question most experts are asking in light of this export trend, however, is how long will the advantages of doing so last?
Some of the answers may come from discussions at the Automotive Logistics Russia conference to be held in Moscow on 24 June. This annual event, which has its 10th birthday this year, is the country's premier open meeting of OEMs and Tier suppliers with their LSPs, representatives of the ports, IT companies and others. Appropriately, the theme this year is 'The flow must go on'. Registration is open.