The Russian automotive industry is showing clear signs of stable growth as well as investment in production capacity once again, but making the best of that growth demands accurate sales forecasts, which is something that the industry as a whole has not been good at, according to Peter Layer, director of purchasing and supply chain at General Motors Russia.
Addressing delegates at this week’s Automotive Logistics Russia conference in Moscow, Layer said that the industry as a whole, including manufacturers and logistics service providers, needed to make some serious improvements in long range investment forecasts for the sake of greater efficiency and to make the most of a promising market.
While the industry remains cautious about such forecasts as the basis for investment, not least given the impact of the recession that halved the size of the Russian market in 2009, speakers such as Layer pointed out that OEMs had already made serious committments to expand production capacity by 2016 under the terms of Regulation 166, the Russian government's initiative to development automotive manufacturing within the Russian Federation.
“I understand that is difficult for those of us who have been scared by what happened in previous years,” said Layer, “but long-term planning will help all of us do our jobs better and more efficiently and that is something we have to concentrate on.”
Five international OEMs, including GM, signed agreements last year as part of Regulation 166, which committed them to investment in plant capacity for 350,000 units per year and increased localisation by 2016 in exchange for lower or zero import duties on parts. Localisation for vehicles will have to reach 60%, as well 30% for powertrain and transmissions. These were areas that are currently "not the strengths of the Russian market", according to Layer, and would require considerable localisation and development efforts.
“There is a lot of aging equipment and investment needs to be made into new technology and facilities to ensure we get quality deliveries in terms of parts and finished vehicles,” said Layer. “There is a ton of infrastructure that needs to be looked at.”
Call for government support were made on the question of inland trucking of vehicles and parts, permits on border crossings into and out of Russia. As was reported last week, the Russian transport ministry has cut permits for foreign haulage companies and implemented steep fines for invalid ones in an effort to protect domestic transport providers (read more here). But Layer also thinks that it will be up to LSPs to come up with the right solutions.
“If it was a stable market and not growing I could maybe accept that as a general solution,” said Layer, “but we are all experiencing growth here and we have to capture that and not restrict it. This is something we are seeing on the trucking permits on border crossings. We need both governmental support and we need you [LSPs] to get creative and figure out ways to deal with the restrictions you currently have,” he added.
A full report from the conference will be available by Friday 22 June here. You can also follow updates from the conference on Twitter using the hashtag #Alrussia.