Go Global Russia - Aftermarket

Go Global Russia - Aftermarket
A study of the Russian Automotive Aftermarket
Written at the request of FKG/Fordonskomponentgruppen
and Tillväxtverket by:
Per-Olof Egli
ISEA – Industry Senior Advisors
+ 46 708 23 03 53, [email protected]
2
Preface
This study has been made by Per-Olof Egli at “ISEA – Industry Senior Advisors”.
Per-Olof co-operates with FKG since 2007 and he has been the project leader for a number of
“Go Global Russia” projects. He speaks fluent Russian and over the years he has built up large
net of contacts within the commercial spheres in the Russian-speaking world. During the last
years this has been, to a large extent, concentrated to the Automotive Industry.
This report is meant to give an impression of the Russian Automotive Aftermarket, in order to
facilitate Swedish suppliers’ entry onto the Russian market.
The project is financed by Tillväxtverket under ”Leverantörsprogrammet för Fordonsindustrin”.
FKG is the initiator of the project.
3
Table of Content
Introduction .................................................................................................................. 5
Background to the Russian automotive market............................................................ 6
Current market situation............................................................................................... 7
Profitability of the automotive market ..................................................................... 7
The Russian market for car service ........................................................................... 7
Russian car sales and production statistics ............................................................... 8
Size of the Russian aftermarket and its future development ..................................... 13
Market structure and players...................................................................................... 22
Specifics on the Russian Market.............................................................................. 22
Sales structure and regionalisation ......................................................................... 22
Marketing channels ................................................................................................. 27
Conclusions ................................................................................................................. 28
4
Introduction
When discussing sales of automotive components we very often talk about sales directly to the OEM
and to the conveyor. This is of course the main issue for most of the component suppliers, but it is
important to remember that most of the cars are run for many years and need to be repaired. It is
difficult to make estimations of the size of a country’s aftermarket, but in order to at least give a
better understanding of the Russian market for spare-parts, and to a certain extent for accessories, it
is important to have answers to the following questions:




How can one estimate its size?
Which are the challenges?
How is it organised?
Who are the players?
These are the questions that we will try to give an answer to in this report. We do not pretend to give
answers to all questions, but the aim is to give a better view on the Russian automotive aftermarket,
a market that is often forgotten or neglected. You will see below that there are substantial amounts
of cars and substantial volumes in money terms to consider.
In this study, we have considered the aftermarket as the market of spare parts for vehicles driving on
the Russian roads. It shall be kept in mind that there are several types of market segments within the
aftermarket;






Locally produced cars by local OEMS
Locally produced cars by international
OEMs
Imported cars with guarantee
Imported cars where the guarantee has
elapsed



Locally produced trucks by local OEMs
Locally produced trucks by international
OEMs
Imported trucks
Locally produced buses
Imported buses
Traditionally the Russian, or Soviet, automotive industry was to a very big extent self-sufficient for
component supplies, as the OEM’s also had their own component production. Over the years, after
the fall of the Soviet Union, this has changed. A Russian-made car is not 100% Russian today, as a
great number of components are imported. On the other hand we see a certain return to selfsupplies of components of the Russian OEMs.
Today the situation has changed as there is a great number of foreign OEMs producing or assembling
cars in Russia. The Russian government is trying to keep as much of the production of cars in the
country, and therefore there are demands and agreements regarding the need of localise production
of components in Russia. This has an impact on the cost of production for the OEMs in Russia, as they
have to prove that they have a certain amount of components manufactured in Russia. For that
reason the foreign OEMs are struggling to invite their normal suppliers to also start production in
Russia. This has been successful when looking at larger suppliers, who have had the means to start a
plant in Russia. Another reason for this procedure is the fact that it has turned out to be extremely
difficult to find Russian suppliers living up to the quality standards that foreign OEMs have. Putting
this information into perspective, there are not only opportunities to become an OEM supplier, but
also to be able to get into the Russian aftermarket, as the volumes increase when looking at cars
needing spare-parts in the future. This means that the Russian market is not only OEM business, but
also a comparatively big market for spare-parts.
5
Background to the Russian automotive market
The Russian car market has changed very quickly over the last 25 years. At the collapse of the Soviet
Union there were five important local OEMs for passenger and off-road vehicles in Russia; AvtoVAZ in
Togliatti (with the Lada cars), GAZ in Nizhnij Novgorod (Gorkij at that time) (mainly known for the
Volga and Chaika cars), UAZ in Ulyanovsk (mostly known for its military and police jeeps), AZLK in
Moscow (Producing the Moskvitch) and ZAZ in Zaporozhe in today’s Ukraine (the small cars
Zaporozhets – copies of NSU Prinz). You can also add ZiL in Moscow producing the famous prestige
cars for the president etc. In addition to these OEMs there were also a number of truck producers;
UralAZ (very heavy trucks), GAZ (with lighter trucks), KAMAZ (being the Volvo or Scania of Russia) and
ZiL with light trucks. In Ukraine KrAZ also produced very heavy trucks and MAZ was present in
Belarus. All these factories are still working, but on a lower scale, maybe with the exception of
AvtoVAZ, being the proud and glory of the Russian automotive industry today. During the Soviet
years hardly any foreign makes were sold.
Today’s situation is more complex, and the big local players are not the big players any more.
AvtoVAZ, majority owned by Renault and Nissan, is the exception, and the biggest one with a
capacity of more than 1 million cars per year, but today producing around 500-600 000 (latest 2014
forecast <500 000). GAZ has left the passenger car scene and is concentrating on LCVs, trucks and
buses. Since the beginning of the 1990’s the situation has changed drastically, and for those that had
money a lot of cars have been imported. Initially private persons imported used cars and the ones
being able to afford it, imported exclusive new cars. Over the years up till now the situation has
become more “normal”, in the sense that Mr. Ivanov can afford buying his own car more easily and
within his own economic frames. This has been followed up by the larger international OEMs. They
have during the last decade started up production of cars in Russia for the Russian market. At the
same time AvtoVAZ has, with some lacking behind, modernised its model range, and they are still by
far the largest OEM in Russia. They meet great competition, mainly in the field of small and medium
sized cars, where Renault, Peugeot/Citroën/Mitsubishi, Volkswagen, Kia, GM, BMW, Nissan, Toyota,
Mazda and Suzuki are becoming more present, and we shall not forget the Chinese OEMs. All these
OEMs have their production/assembly in Russia. Renault and Nissan are producing together with
AvtoVAZ to a certain extent, as these two companies are co-owners to AvtoVAZ together with the
Russian state. The volumes sold are at this moment decreasing over all, but the Lada cars still have a
market share of 16%, which is going to be increased to 20% as per the new Swedish President Bo
Andersson.
6
Current market situation
Profitability of the automotive market
In general terms it is well known that car dealers do not earn that much money on pure car sales. In
Russia there is an estimation that looks as follows;
Sales of new cars
Repair and service
Sales of spare-parts
5-10 percent profit
20 percent profit (of which the profit of sales of oils and other technical
fluids can be up to 300 percent)
70 percent profit
The Russian market for car service
There are different ways of servicing your car depending on the age of the car. The newer the car –
the more often it is serviced at a certified brand garage, especially if the guarantee is still valid. When
the car is getting older it is more often the uncertified/unofficial garages that take over both service
and repairs. In addition to this there are local even more unofficial garages and of course do-ityourself (DIY) persons.
The estimates of how the market is shared between the different types of service and repair are
unofficially as follows:
White, official, certified repairs and service with original spare parts
Grey market repairs by uncertified garages with same quality or pirate spare-parts
Black market and DIY – often with fake or “same quality” spare-parts
30 percent
35 percent
25 percent
Russian car dealers think that the market is shared equally between the “white” and the “grey”
market, if you do not consider the DIY etc. part. In this context it is important to underline that the
DIY part is to a great extent related to the cars produced within Russia, as they traditionally have
been much simpler in their construction, and thus easier to maintain on a personal basis.
Taking these figures into consideration you can say that the largest targeted market for spare-parts is
the service stations, especially the brand loyal stations. On the other hand a study made by “TD
Luzar” is a little bit contradictory to this as it shows that there is a difference in the purchasing
pattern depending on the origin of the cars. This study shows that for domestic brands the sales in
retail shops amounts to some 84%, internet sales 6% and service stations 10%. For foreign brands the
figures are: retail shops 34%, service stations 6% and internet sales 60%. Is there any conclusion to
draw from this? The obvious one is that the Russian brands have more DIY repairs because of simpler
constructions, older cars and more cost sensitive owners, whilst the foreign brands are more
complicated to serve and to repair. It is not possible to draw any conclusions on how much of the
internet sales are private customers and how much emanates from service stations.
7
Russian car sales and production statistics
In order to give an impression of the market in figures, you will below find statistics and graphs
showing the development of the Russian automotive market in respect of production and sales. We
have included passenger cars, trucks and buses to give the whole spectrum of the market and to get
an impression of volumes and opportunities. It is interesting and important to study the changes in
shares of domestic brands and foreign brands (both imported and locally produced).
Sales of passenger cars in Russia 2001 – 2013 ‘000
Figure 1 – Development of different types of sales of passenger cars. Production in Russia increasing but
Russian brands decreasing
Production of passenger cars in Russia 2000 – 2013 ‘000
Figure 2 – Foreign Brands produce the highest volumes in Russia today
8
We have above looked at the passenger car situation, where the share of foreign brands increase
both on the production a3-8. In these figures it is clearly shown the development that has taken
place since 2000. It is also evident that the imported trucks and buses are diminishing (contrary to
the passenger car situation), whilst the share of locally produced foreign brands increases.
Sales of trucks in Russia 2001 – 2013 ‘000
Figure 3 – Truck sales show the same pattern as passenger cars
Production of trucks in Russia 2000 – 2013 ‘000
Figure 4 – Localised truck production of foreign brands goes slower than for passenger cars
9
Sales of buses in Russia 2001 – 2013 ‘000
Figure 5 – The same development is seen also in bus sales
Production of buses in Russia 2000 – 2013 ‘000
Figure 6 – Clear volume drop but foreign brands increasing their shares.
10
Car sales 2008 – 2013 (∑2013≈2,9 million)
Figure 7 – the same statistics but in figures
Figure 8 – detailed information for passenger cars and LCVs – including different scenarios
11
Prognosis of the volume of manufactured cars in Russia
2014 – 2020 ‘000
Figure 9 –one forecast of the production of vehicles in Russia 2014-2020 – all types of vehicles and domestic and
foreign brands together
12
Size of the Russian aftermarket and its future
development
The size of an aftermarket, in any branch, is very difficult to evaluate. The reason for this is the fact
that in the automotive industry there are no official statistics and the market is divided into several
different areas, depending on e.g. the age of the car, the price situation, illegal production/import
etc.
There are some attempts of doing an evaluation of the size and the development of this market. In
figure 10 you find the estimation from the Russian automotive statistics company Autostat. These
figures show that there has been a steady increase in the aftermarket after the crisis years 2008-09.
The reasons for this can be found in several reasons.
The number of cars in general increases, although the figures are not totally reliable, and the
statistics not really present. In Figure 11 you can have a quick view of the total number of registered
vehicles and the estimation of the number in the years to come. We can have a qualified guess that
the correct number is somewhere in between the registered and the estimated. If we make a
calculation that there are around 40 million cars on their wheels in Russia, including all types of
vehicles; passenger cars, trucks, buses and LCVs, we can assume that 5 per cent roughly are new cars
without any need of spare parts. The rest of the cars will need spare-parts at one point. The annual
sales of vehicles are in the region of 2.5-3 million per year. If we just have a look at the passenger
cars, there is an estimation from Autostat (Figure 12) showing that the number of cars will increase
to 47 million in 2018. This projection also shows the impact the foreign brands will have on the
Russian market. The previsions show that the sales of LADA cars will decrease its share of the total
car park in Russia from 35 per cent to 28.5 percent.
If we look from a supplier’s point of view, this means that the number of foreign cars will increase on
the Russian market, and this also means that the number of imported (or locally manufactured)
spare parts for the aftermarket will increase over all. As can be seen in Figure 12 the part of LADA
cars and other Russian brands is considered to be rather stable, and the increase is only for the
foreign brands. On the other hand it is very probable that the part of components in the Russian
brands that are of foreign origin increases, which means that there will always be a demand for the
components manufactured by foreign suppliers, both outside of Russia or localised within Russia.
In figure 13 it is possible to see how the Russian aftermarket is distributed in respect of different
types of components. By far the two largest sections are tyres and suspension components, which is
not so difficult to understand, due to the standard of Russian roads. The estimation of the volumes of
the market is, in 2014, as can be seen in the figure9, USD 25 147M, which shows that there is a great
potential for spare-parts suppliers on the Russian aftermarket.
As the forecasts are not facts, you will find below some relevant and additional information in
Figures 13-17, taking into consideration different views and previsions. In Figures 16 and 17 you are
also able to have some ideas about the development depending on the sanctions development,
which is a comparatively recent addition the situation to consider.
13
Volume of aftermarket in Russia, and its development
Figure 10 – Russian aftermarket figures
Vehicles in use 2013 ≈46,6M
Figure 11 – Registered vehicles and an estimation of vehicles in use in Russia in 2013.
14
Passenger Cars – in 2014 ≈41,1M
Figure 12 – Estimation of the Russian passenger car fleet until 2018 by Autostat
Structure of the Aftermarket in 2013
Figure 13 – Russian aftermarket – divided into different types of spare-parts
15
Growth of the car fleet to 2020, million
Figure 14 – Forecast of the Russian car fleet by Avtotor, including age of fleet in different years
Import to Russia of cars, components and spare-parts
Figure 15 – the yellow figures show the value of imports to Russia in 2012 of spare-parts – giving an indication of
the size of the aftermarket, despite the comparatively old figures
16
Figure 16 – Sales estimation in the Russian market taking different scenarios into consideration
Figure 17 – Forecast of the sales development in the Russian market, taking different scenarios and economic
development into consideration
17
In Figure 18 it can be seen that the evaluations for the future in respect of components, both for
direct OEM supplies and for spare-part sales have been increasing drastically during the last years,
and the forecasts are that it will increase even more in the years to come. In this respect it can also
be seen that this estimation indicates an increase in the share of spare-parts compared to the share
of OEM components.
Development of the auto component market
Figure 18 – Auto component market divided into both OEM component supplies and spare-part supplies – value and
yearly change
One opportunity in the Russian market is the localising of production of components/spare-parts in
Russia, and today there are a number of companies present with production and Figure 19 shows
both the names of the suppliers and where they are located.
The question that will occur at some point is the localisation of production, which is most important
if you are a supplier to the OEM conveyors. It is in this respect interesting to look at the top 10
component suppliers in the world (see figure 20), where you can see that 8 of the 10 are actually
producing in Russia. This step might seem frightening, but once established the market might open
rather quickly as the word spreads around very quickly.
If the reader of this report is a supplier to, especially the foreign, OEMs in Russia, via the OEM’s
purchasing headquarters not in Russia, it is of great interest to have a look at the question of
localisation. The reason for this is twofold: Firstly it is of interest to the OEM in Russia in respect of
agreements with the Russian government for the share of localised components, and secondly it is of
interest for the after-market. With localised production the distribution will be much easier than
importing from abroad. For setting up production in Russia there are several ways of doing this; 1)
Greenfield investment; 2) Joint Venture with a local company (not recommended for several
reasons); 3) Buying an existing local company; 4) licensed production.
18
Foreign component suppliers in Russia
Figure 19 –which of the component/spare-parts suppliers are present with localised production and where are they
located?
Top 10 world leaders among auto component suppliers
Figure 20 – Component suppliers’ view on Russia for production
Russia also has one specific peculiarity, which to a certain extent is shown in Figures 21 and 22, but
needs a special explanation. Foreign brands manufactured in Russia need to produce more than
350 000 cars/year in order to receive special conditions in respect of customs duties etc, and at the
same time they are required to have a specific percentage of the components produced locally.
These agreements are valid until 2018, and some researchers sees a threat that the number of
foreign OEMs in Russia might decrease after they have ran out. This would mean that the number of
19
locally produced cars in Russia will decrease, and that imports would go up. It is difficult to say today
if this is going to take place, but it might be important to keep it mind when considering an entry
onto the Russian market – as an exporter or as a localised manufacturer.
Figure 21 – Description of a scenario where imports to Russia can increase, due to close down of foreign OEMs
Figure 22 – Description of the OEMs at risk to close down until 2020 – as per Roland Berger Strategy Consultants
20
Growth of the automotive market and aftermarket
Figure 23 – The development of the Russian aftermarket, including sales of cars and need of spare-parts/components
One conclusion about the Russian aftermarket for spare-parts is made by Evgeny Bednjakov, working
for the Sogefi group, and having written an article in the journal “Upravlenie Avtobiznesom” (“How
to manage car business”). He foresees an increase, both in the number of cars and, in particular, the
aftermarket. This, he predicts, will be going on until 2018, after which year both markets will
stagnate. If his prediction will be fulfilled, the aftermarket for cars on the Russian market will be close
to EUR 9 000M in 2018, and then dropping to around EUR 7 500M. This is one idea, and it is shown in
Figure 23. This means that the prospects of selling larger volumes on the market are big. The
question that could be asked in connection with this Figures is of course the monetary figure, as it
seems to be less than half of the forecasts that have been seen above. This is a problem that we have
to live with as there is no reliable official statistics to lean on to.
21
Market structure and players
Specifics on the Russian Market
Original
This is the case for most of the newer cars, i.e. for cars with still active guarantees. These cars are
normally serviced and repaired at the brand’s own workshops, which means that they are
maintaining the quality they are supposed to do in order to have the guarantee working as predicted.
Same quality
Normally these types of aftermarket products are coming from the original supplier, but under
another brand. Here we have the question whether the original brand can accept this as being
original spare parts or not. This is not a typical Russian problem, but a worldwide problem.
Fake
Fake components is a big problem on the Russian market, especially when looking at the domestic
brands, as there are a huge number of fake components sold on the Russian mainly imported from
China, but there are also a big number of local fake producers selling low price and low quality
components. The sales of spare-parts on the aftermarket are restrained by the massive import of
unoriginal and counterfeit products from abroad.
Sales structure and regionalisation
Federal players
If we look at the Russian geography, you can say that the territory is vast, giving a big problem in
covering the whole country. Therefore there are only a few federal players on the market, like
Automag, AGA, Koreana, Auto49 and Bi-Bi.
Automag (Автомаг)
You can say that you find these companies everywhere, but if you look at it
in detail you realise that they are mainly around Moscow and in the
European part of the Russian Federation. They are organised in a net of
franchising companies.
AGA (АГА)
Mainly concentrated in car chemistry details, car cosmetics and
accessories.
Koreana
A specialised company, as can be understood from the name, working with
the Korean car makers – Hyundai, Kia, SsangYong, Daewoo + Chevrolet.
This is a really wide-spread chain as they have 200 outlets from
Kaliningrad/St. Petersburg in the west to Sakhalin in the east.
Most of the outlets, however, are places where you can pick up orders.
Orders are placed over the internet with delivery times of up to 30 days.
In northwest Russia they have real shops – 65 of them.
22
Avto49 and Bi-Bi
These two companies are in fact in the same chain, with a greater number
of shops in Moscow and Moscow region – 38 shops. 11 in St. Petersburg
and 20 in the rest of the country.
They concentrate on trade over the internet, and also on “budget” cars.
Delivery time – 2-3 days.
Regional chains
In addition to these more or less federal chains you can find a number of regional chains, mainly in
the Moscow region and the Volga region.
Avtopasker
In Moscow and a radius of 600 km.
Around 40 shops
Mostly domestic brands
You can find anything needed
In Moscow you can find a lot of stores with an enormous assortment. They are often co-localised
with a work-shop or with a tyre shop. The largest of these are;
Tekhkom
A holding company with “internal” smaller groups. They also sell truck
parts.
Rus-Treyd
12 stores. No. 2 in Moscow. They also sell parts to motorcycles and
bicycles.
Avtokemp
No 3 in Moscow. A holding company. All stores have the same pricing.
They also sell family goods.
23
E-traders
In addition to the store-oriented chains of spare-part sales there is nowadays a very well defined
market working on the internet with the so-called e-trade. In this area we find both local companies,
but also international companies having set up their organisation in the Russian Federation. As
figures for this type of sales are difficult to find, we try to name some of the big players on the
Russian market. It is important to mention also that most of these companies are not only selling to
the end customer, but they also act as wholesalers to work-shops, local distributors etc.
We will name some of the players on this market, without any order of size etc. For those of you
interested in this market, we believe it being of importance to start working through one or several
of these companies.
Exist.ru
This is a company specialising in spare-parts to foreign brands. Everything
is ordered via internet, and the delivery can be done in three different
ways:
 Pick up at an “Exist.ru” office
 Courier service
 Other transport (if there is no office or if it is impossible with
courier service (not unusual))
It is important to notice that that “Exist.ru” has some 350 offices (not
stores) in the whole of the Russian Federation. They say themselves that
they are present from St. Petersburg to Vladivostok. In their portfolio
they sell 26 million different components from 1 200 leading suppliers. Of
these they state that more than 300 are from EU, from UAE, from Japan
and from Belarus. They do not only supply traditional components but
also accessories and special items.
Most of the parts are for European, Japanese and Korean cars. When
looking at the web-site you find the on-line catalogue for original spareparts. At the same time it is possible to look at components from
alternative suppliers and also to make comparisons on-line. “Exist.ru” also
acts as wholesalers.
AD Russia
(AutoDistribution
Russia)
This is the Russian company of “AutoDistribution International” in
Belgium. In this group 7 independent companies are included;
 AD Avanta – distributor in southern Urals
 AD Berg – one of the biggest distributors in Russia of spare-parts,
oils and workshop equipment. 14 subsidiaries with their own
warehouses and 13 trade representatives from Moscow to
Vladivostok. More than 8 000 000 items in their catalogue.
 AD Koleso Fortuny – one of the leading distributors in north-west
Russia.
 AD Megaros – specialised in spare-parts for passenger cars.
 AD Mikado – concentrating in wholesale distribution of high
quality spare-parts for the most known brands in passenger cars,
trucks and LCVs.
 AD Moskvorechie – their main aim is to act as a wholesaler for
spare-parts for European, Korean and Japanese cars.
 AD Smartek – a trading and stock-holding company within the
group.
24
AD Russia is present in 32 regions and in 37 larger cities.
Rossko («Росско»)
This is a Russian distributor of spare-parts. It belongs to GroupAuto
International, which in its turn has created Group Auto Russia – and
association of independent distributors in Russia.
They are representing around 70 suppliers to a clientele of around 7 000.
In total they represent 70 000 components. The clientele consists of
independent retailers, stores and service stations all over Russia. (See
map below).
Shate-M Plus
(«Шате-М Плюс»)
This company is a little bit different to compared with the others as it is
based in Belarus, where they have become one of the stronger players in
the market. They are now building up a distribution net also in Russia.
Their hubs are in Podolsk outside of Moscow and in Ekaterinburg in
western Siberia/Urals. At the same time the Minsk hub is also important
for Russia, as Russia and Belarus are in the same customs zone. Shate-M
Plus is working in all fields of spare-parts distribution – wholesale, retail
and in between, but the focus lies on wholesale. The spare-parts in their
portfolio are mainly for so called western cars – European, American,
Japanese and Korean. But they also distribute to a certain extent spareparts for the Russian-made cars. Today they co-operate with some 150
different supplier brands of well-known origin.
25
The distributors mentioned above are mainly working with passenger cars, with some exceptions.
The market for truck spare-parts is to a certain extent separate from the one for passenger cars, but
maybe it is better to call it the market for commercial vehicles as LCVs also are included, as will be
seen below.
Truck Motors
(«ТракМоторс»)
This company specialises in spare-parts for trucks, trailers and buses.
They have 32 000 parts in stock, for all of the foreign brands present in
Russia. Over the years they have established co-operation with more
than 85 well-known suppliers to the market for heavy vehicles. The
number of clients is around 1 300. In figure below you can see the hubs
and the distribution network.
GOK («ГОК»)
A Truck part distributor, working only on an e-trade basis. They have a
large number of parts in stock. Located outside Moscow
Planeta Zhelezjaka
(«Планета
Железяка»)
They are concentrating on truck parts, but also have a lot of spare parts
for the passenger cars. For trucks mainly domestic and Chinese makes,
but for passenger cars also for foreign brands.
These are only a few examples, but there are a great number of other separate distributors
specialising in the truck business, mainly situated in Moscow but with well established distribution
networks to the regions. Most of the companies work as e-trade companies. You can name some of
them: Viman, Inodetal.ru, Avto+/Kerax, mehanika.ru, mvs-auto.ru, at-part.ru, univex.ru, etc. etc. It is
important to note that this is only a collection of examples, as there are many more on the market.
26
Marketing channels
Journals
There are a great number of specialised newspapers, both for subscription and pure advertising
journals. These journals are only in Russian, but they are well spread in the market. You find them in
every specialised shop for spare-parts and they are in most of the cases also presented in one form
or another at exhibitions. Examples in this category are: “Gruzovoj Press” – www.gpmag.ru –
specialising in trucks, buses and LCVs; “Kuzov” – www.kuzov-media.ru – a magazine for workshop
equipment and for repairs of car bodies; “Avtozapchasti i tseny” – www.autozap.biz – a free
magazine only financed by advertising. There are also some “modern” issues, where you can
subscribe on the magazines on the internet or download apps in order to follow them in an easy way
on your smartphone. Examples of this are “Spetstekhnika i kommercheskij Transport” , and
“Avtokomponenty”, both issued by the same company - http://maks-m.com/EN/ The first one covers
commercial equipment and the second one is a journal concentrating on auto components, with
articles on different topics, but also with a number of advertising.
Exhibitions
Exhibitions in Russia are very common, and they are not concentrated to Moscow, but can be found
in many places around the year. In addition to the large exhibition malls in Moscow and St.
Petersburg, there are a number of regional exhibitions as in Novosibirsk, Togliatti and Chelyabinsk. It
is absolutely possible to expose products at these exhibitions, but the opinion of the author is that
they are not very efficient, as the public visiting them is mainly local, and, depending on the
exhibition, very limited both in space and participants. All this is noticed despite heavy marketing for
the event. There are especially two well-known exhibitions in Russia – Automechanika in Moscow
with a very international panel of participants and CTT also in Moscow, dedicated to heavy vehicles,
construction equipment etc. Both of these exhibitions have an international recognition.
Distribution
The distribution of spare parts on the Russian market is done in the following way as per the
information from the Russian statistics company “Autostat”:
 There is a central stock in Moscow at the distributor – this is to large extent due to the
country’s hard centralised system, finding its way also into the distribution of spare
parts. 5-10 % of the distributed parts go this way;
 50-70 % of all is made by specialised wholesale companies distributing either on a federal
level or on a regional level;
 The rest of the distributed parts are taken care of by other players in the market, or by
middlemen.
27
Conclusions
Is it possible to give a definitive answer how to proceed to engage in the Russian automotive
aftermarket? The answer that we would like to forward be that it is absolutely worthwhile if:
 You are supplying to cars already sold on the Russian market
 You can sell your spare-parts outside of the original brand sales network – maybe under
another brand name
 The brand distributors are unevenly spread over the country
 You are supplying to trucks and buses – especially to heavy trucks and long-haul buses – they
cover long distances on not so good roads (not to exaggerate)
 You are not only into spare-parts but also into accessories – there is a big demand for
pimping your car – especially if it is a little bit older and of lower price levels
Are there any advises to give? Having read the text above it seems rather obvious that the best way
of going forward is to get into contact with the larger distributors and retail chains. That is the best
way to get your components spread onto the market. There seems not to be any demand for
exclusivity from these companies, so in principle it should be possible to work with all of them.
In order to understand why to invest in the Russian market you should consider the questions below
(source: PwC). Localisation of production of components in Russia, key questions worrying global
suppliers;
 Market volumes
 Long-term politics/strategy of the state
 Development of Russia’s economy and the dynamics of the Rate of exchange
 Logistics (infrastructure)
 Availability and costs of raw materials
 Availability and efficiency of personnel
 Cost of production machinery (equipment)
 Additional costs and time for testing and validation
All these questions are very relevant, but they are possible to overcome and to manage. They might
be more adequate for production set-up, but some of them are also very actual if you are looking
into starting business in Russia by way of exports. Of course some of them are more risky than
others, but normally the risk-taking in Russia is profitable in the long run, only the first step is taken.
It is also important to underline that it is a big difference between setting up production and “only”
selling.
The advice that can be given to suppliers hesitating about the Russian market is the following:
“Do not underestimate the Russian market – with the right entry strategy and the right attitude –
the market will be conquered”
Sköndal 2014-09-30
Per-Olof Egli
ISEA – Industry Senior Advisors
28