Russia's largest truck manufacturer Kamaz is developing its global logistics with a focus on the creation of production facilities abroad. The company is eager to maintain growth sees the prospects of doing so in the Russian market as less likely. by Vladislav Vorontnikov

"Although the capacity of the Russian truck market grew by 16.5% to $116.4m, the total sales of heavy trucks has not even reached pre-crisis levels,” said a spokesperson for the truckmaker.

He said that Kamaz retained its leading position in the market but that by the end of 2012 the share of Kamaz had in the total structure of sales in Russia was 33%, which is by 5% lower than in 2011.

In the first quarter of 2013 the continuing fall in demand for heavy vehicles in Russia cut the company’s level of net profit by half.

At the same time, direct exports from Russia are not profitable for Kamaz because it has no way of gaining a foothold in the target markets. Instead the company is looking at investing in production facilities abroad and creating strong logistic chains include the supply of spare parts.

"The fact is that for Kamaz it is reasonable to exports trucks produced in Russia only to neighbouring countries. Also, the ratio of the ruble against the dollar is above 32 points,” said Andrey Shenk an analyst from Russian research company, Investcafe. “The weak exchange rate together with the other factors lead to the fact that direct export supplies of Kamaz vehicles from Russia in the first quarter of 2013 fell by 45%.”

In response, the company has recently disclosed plans to open assembly facilities in more promising global markets over the next few years, particularly in Brazil, Turkey, Indonesia and Lithuania; the latter being particularly important for Kamaz as it will give the company direct access to the EU market. If the plans are realised within three or four years the company can directly supply its products to those markets with more favourable prospects.

"For KamAZ the organisation of the assembly plants is primarily opportunity to find new markets and expand its presence abroad,” said the company. “All the more so [because] almost all joint ventures in foreign countries, after two or three years of being created, reach the level of the output required for profitability and to continue investing in the localisation of its own funds.”

Indonesia is also expected to be priority market for Kamaz in the coming years as the demand for the type of vehicles it produces takes off.

“It is clear that Indonesia could be interesting as a developing market where growth is projected and in which, consequently, it is expected that the level of mining and construction will also grow, which directly leads to an increase in demand for trucks. In addition the fact that the country has quite cheap workforce will also reduce the cost of production,” said Shenk.