FrostSullivan_Outsourced Design and Engineering Market

Transcription

Design and Engineering Service Opportunity within
Russia and the CIS
“Evaluation of the Outsourced Product Development Market
and Identification of Potential Opportunities for UK Design and
Engineering Companies”
FINAL REPORT
Prepared for
SMMT
June 2008
“We Accelerate Growth”
Project aims, Objectives and Scope
Aims and Objectives of the Project:
The project objectives were to establish the size and potential of the Outsourced Product Development
market in Russia &CIS countries and to identify areas which will require UK Engineering Consultancy
support allowing the DEG to:
“Identify Russian Market Potential and Evaluate Growth Opportunities for British companies in
the Russian Design and Engineering Services Market.”
Geographic Scope :
The project focussed on Russia and the CIS countries of Belarus,
Ukraine, Kazakhstan and Uzbekistan.
Vehicle Segments:
The project focuses on the following vehicle segments, namely:
• Passenger Cars,
• Light and Heavy Commercial Vehicles,
Confidential to SMMT/DEG
2
Project Approach
The Project Approach
Frost & Sullivan followed a three phase approach for the SMMT. In the first phase, the aim was to create a
fact foundation to evaluate the market across the regions in order to target OEMs and Tier 1 suppliers.
Also the aim was to understand the potential for outsourced engineering services.
The interim report was presented to the SMMT where key findings were be presented where queries and
feedback was discussed. Phase 2 then finalised the market intelligent exercise and this document is the
final report which will be presented to the SMMT and DEG group members on the 11th June 2008 .
Phase 1
Initial Market
Intelligence
Exercise
Nov „07 – Feb „08
Interim
Report
Delivery
and
Feedback
Session
20th
Presentation
February „08
Phase 2
Additional Market
Intelligence
Exercise
Feb – May „08
Delivery of Final
Report &
Presentation of
Results
Presentation 11th
June „08
Current Status
3
Interview Schedule
The Project Approach
The research has been gathered through primary interviews. Frost & Sullivan focussed the scope on
Russia, Ukraine, Kazakhstan, Uzbekistan and Belarus as the diagrams below show that it is in these
countries that Passenger Cars, Light and Heavy Commercial Vehicles and Buses and Coaches are
produced.
2006 Vehicle Production for Russia and the CIS
Passenger Cars
Kazakhstan
Uzbekistan
1%
11%
Ukraine
15%
Light and Heavy CV‟s
Buses and Coaches
Belarus
2%
Belarus
Ukraine 7%
3%
Uzbekistan
0.01%
Ukraine
5%
Russia
93%
Russia
73%
Russia
90%
In total, 26 companies were spoken to throughout the project
Complete interviews were held with the following companies in the project
Companies Interviewed
ZAZ
Asia Auto
GAZ Group
Project Interviews
Kamaz
ZIL
Ural (GAZ)
SeAZ (Avtokom)
Skopinsky Agregatniy Zavod
Avtopribor
AutoKrAZ
AvtoVAZ Aggregat
NAAZ
ZMZ
UMZ
Segment
OEM
OEM
OEM
OEM
OEM
OEM
OEM
Supplier
Supplier
OEM
Supplier
Supplier
Supplier
Supplier
Position in the company
Chief Designer
Technical Development Director
Passenger Car Competence Centre
Product Planning Development Director
Director of Product Development Department
Deputy Chief Engineer
Product Planning Director
Chief Designer
Technical Director
Deputy to the technical director
Deputy Director
General Director
Director of the Technical Department
Chief Designer
Partial interviews were held with the following companies in the project. Information from these
interviews was used to validate market information.
Companies Referenced
UAZ (Sollers)
Bogdan
AvtoVAZ
Izh-Avto
KZAE
YaMZ
MAZ
Autodesign
Avtoprostor
Novgorod State University
Segment
OEM
OEM
OEM
OEM
Supplier
Supplier
OEM
D&E Provider
D&E Provider
D&E Provider
Position at the company
Chief Designer
Chief Designer
Deputy Chief Designer
Technical Director
Main Engineer
Development Director
Market Research Director
Director
Commercial Director
Head of the Vehicle Department
5
1.
Executive Summary
Slide 8
2.
Overview of the Russian and CIS Automotive Markets
Slide 14
3.
Overview of the Russian and CIS Design and
Slide 24
Engineering Market
4.
Strategic Analysis of the Outsourced Design and Engineering
Market
Slide 37
5.
Demand Side Analysis
Slide 56
6.
Profiles of Key OEMs and Suppliers
Slide 61
7.
Strategic Conclusions and Recommendations
Slide 98
Appendix
1.
Russian and CIS Automotive Markets
Slide 104
2.
PESTLE Analysis
Slide
110
6
1. Executive Summary
•
Overview of the Russian and CIS Automotive
Industry
Slide 8
•
Position of the Russian and CIS D&E Market
Slide 9
•
Key Market Drivers, Restraints and Challenges
Slide 10
•
Key Market Trends
Slide 11
•
Slide 12
•
Willingness to Cooperate by OEM
Slide 13
7
D&E Budget in Russia and CIS Automotive Markets Represents
Only 2 per cent of the Global D&E Spends
• Increasing oil and raw materials prices have negative
impact on the competitive advantages of local vehicle
manufacturers and components producers.
Market opportunities are
rapidly identified
Mass entry of foreign OEM’s
• Gradual shift in consumer demand towards higher quality
and service level changes the consumption preferences
and patterns.
Local OEM’s look for
potential
partnership/collaboration
Global D&E Markets, 2007
4,500
Million Euro
Executive Summary
• High market growth rates and attractive investment climate
in Russia and CIS countries are forcing rapid entry of
leading EU, US, Japanese, Korean and Chinese OEM’s.
4,050
12%
4,000
2%
3,500
3,000
86%
2,500
• Lower D&E spends in Russia and CIS
markets are the reflection of the difficult
times the Russian and CIS automotive
industries are facing.
2,000
1,500
1,000
500
• While global market for D&E services is
estimated to reach €4 billion in 2007, D&E
spend in the Russian and CIS market
reached €85.7 million for the same period.
540
86
0
Global D&E Market Indian D&E Market Russia and CIS D&E
Market
• Russian and CIS companies are expected
to increase budgets devoted to D&E in the
next 8 years.
8
Outsourced D&E Market Is Expected to Increase in the Next 8 Years
and Reach 58 per cent of Overall D&E Market In Russia and CIS
Russian and CIS D&E Markets, 2007
• Outsourced D&E market has strong potential in
Russian and CIS countries being capable to
potentially generate up to €38.5 million in turnover
by the results of 2007.
€ 85.7
million
Executive Summary
€ 38.5
million
Russian and CIS
D&E Market
45% of
D&E
market
• Outsourced D&E services have strong growth
potential in the next 8 years reaching €92.1 million
in turnover that represents almost 140 per cent
increase compared to the level of 2007.
Russian and CIS
Outsourced D&E
Market
Russian and CIS Outsourced D&E Markets, 2007
• Efforts of the Russian and CIS OEMs and
suppliers in expansion of the product lines and
modernisation of the existing products are
reflected in the D&E budget allocation across
different D&E sectors.
Manufacturing
Engineering
15%
Design
30%
Test & Validation
10%
• Design of the new products (virtual
modelling, interior and exterior design) and
product engineering take 75 per cent of the
overall outsourced D&E market in Russia and
CIS.
Product
Engineering
45%
9
Key Market Drivers, Restraints and Challenges
Probability
Expansion of OEM‟s
product lines
requires new D&E
approach
Government
Increasing sales
supports
allows increase
investments into
financing of
D&E
outsourced projects
Partnership with
Complicated
foreign OEMS and
organisational
suppliers slows
processes raise
penetration of the
barriers for efficient
foreign D&E
collaboration
providers
Low D&E
Language barriers
spends
still negatively
compared to
affect
the other
communication
developed
between
markets
organisations
Market Challenges
Drivers
Restraints
Executive Summary
Lack of inhouse
technological
expertise by
OEMs and
Suppliers
Possibility of market turmoil similar to the
Russian government default of 1998.
Low
Lack of professionals in industry would
persist.
Low
Investment climate would worsen due to
non-competitive and questionable steps
followed by the State Authorities in
regulating business environment.
Absence of market transparency and
administrative barriers limiting
development of the Russian and CIS
outsourced D&E market.
Russian and CIS OEMS and suppliers
increase collaboration with foreign OEMs
and suppliers.
Source: Frost & Sullivan
Low
Medium
Medium
10
Outsourced D&E Services Have Strong Potential for Growth in the
Next 4-5 Years
Key Market Trends in D&E Market (Russia and CIS), 2007-2015
Market Trend
1-2 Years
3-4 Years
5-6 Years
Entry of foreign D&E providers to the Russian and CIS
Executive Summary
markets; intensification of collaboration with local OEMs and
suppliers.
Accelerated growth of design and engineering sector.
Modernisation of the production facilities to support market
sales.
Consolidation of the market
General improvement of business environment and normative
legislarure.
Tightening of competition across the segments
Market transparency improvement.
Strength of the trend
11
DEG Member Should Consider Active Search for Collaboration with
Russian and CIS Companies
•
Passenger Car
Executive Summary
OEMs
•
•
Commercial
Vehicle OEMs
•
•
Tier 1 & 2
Suppliers
•
•
•
Proactive
business
development
Primary focus should be given to offering
solution in exterior and interior design, facelifting and new models design.
Modernisation of the existing vehicles is
required.
Existing expertise of the DEG members in
cabin exterior and interior design is required by
the local OEMs.
Modernisation of the existing vehicles in
required.
Product engineering has strongest demand
from all the Tier 1 & 2 suppliers.
Expertise in low cost components engineering
is required.
Local companies need support in
modernisation of the production processes.
Support in implementation of the D&E
software.
Complex
solution
Ability to
show
expertise and
technological
superiority
Adaptation to
the local
business
environment
Success Factors
• While Russian and CIS OEMs and Tier 1&2 suppliers search for the solutions in the all design
and engineering areas, SMMT/DEG members should start planning visits to local companies.
12
Location of Organisations Willing to Cooperate with SMMT DEG
Scale used for willingness to co-operate
0= No Interest, 4 = High Interest
Avtopribor = 3
NAAZ =1
Executive Summary
ZIL = 0
RUSSIA
GAZ = 3
AvtoKOM = 4
UMZ = 3
YaMZ = 2
UAZ = 2
MAZ = 2
KAMAZ = 4
● Ulyanovsk
● Nizhniy Novgorod
● Vladimir
SAAZ = 4
KZAE = 1
● Miass
● Naberezhnyje Chelny
 Moscow
Minsk 
BEL
Ural (GAZ) = 3
● Tolyatti
● Skopin
Asia Auto = 1
UKR
●Kremenchu
g
● Zaporozhie
KAZ
UZB
AvtoKraz = 1
ZAZ = 2
AvtoVAZ Aggregat = 3.5
ZMZ = 3
13
2. Overview of the Russian and CIS Automotive Markets
•
Analysis of the Russian and CIS Automotive
Slide 15
Industry
•
Overview of the Vehicle Production and Sales in
Russian and CIS countries
•
Map of Russian and CIS Passenger Car OEMs
•
Map of Russian and CIS CV and BUS OEMs
•
Overview of the Key Holding Groups
Slide 17
Slide 20
Slide 21
Slide 22
14
• Russian and CIS automotive industries feature more
than 40 local OEMs and more than 2,000 Tier 1 and
Tier 2 suppliers.
• Increasing oil and raw material prices have a negative
impact on the competitive advantages of local vehicle
manufacturers and components producers.
• A gradual shift in consumer demand towards better
quality and service level change consumption
preferences and patterns.
Russian and CIS OEMs are focused on the creation of
JV with foreign OEM‟s, assembly of foreign brands, rebranding, creation of new models and/or general
business reorientation.
Passenger Cars
20
20
15
10
4
5
1
1
0
Light and Heavy CV‟s
• High growth rates of CIS automotive markets and
attractive investment climates especially in the
Russian automotive industry are forcing rapid entry of
leading EU, US, Japanese, South Korean and Chinese
OEM’s.
Buses and Coaches
Russian and CIS Automotive Markets Overview
Russian and CIS Market Have Large Number of Automotive OEMs and
Suppliers Across All Segments
Number of Local OEMs per Sector, 2007
20
15
14
10
3
5
4
1
0
20
17
15
10
5
2
1
1
Belarus
Uzbekistan
0
Russia
Ukraine
15
Russian OEMs in Truck, Buses & Coach Segments Hold More than 90%
of All Production in CIS
OEM‟s
Passenger
Cars
Commercial
Vehicles
Buses and
Coaches
Russia
•
•
•
•
•
•
•
•
•
Ukraine
AvtoVAZ
GAZ
Severstal Avto (UAZ)
Izh-Auto
Avtokom (SeAZ)
TagAZ
Avtotor
GM-AvtoVAZ
Others
•
•
•
•
•
•
GAZ
Kamaz
ZIL
URAL
UAZ
Others
• Kamaz
• GAZ Group (5
OEMs)
• Bogdan
• Others
•
•
•
•
Belarus
Uzbekistan
Kazakhstan
Uzbekistan
1%
11%
Ukraine
15%
• UzDaewoo
Auto
ZAZ
Bogdan
Anto-Rus
Evrokar
Belarus
Ukraine 7%
3%
• AutoKrAZ
• Rotor
• ZAZ
• LuAZ
• LAZ
•
•
•
•
BelAZ
MAZ
MoAZ
MZKT
• MAZ
Russia
73%
• SamKochAuto
• SamKochAuto
Belarus
2%
Russia
90%
Uzbekistan
0.01%
Ukraine
5%
Russia
93%
16
Russia Demonstrates 16.9% Growth in Sales of All Passenger
Vehicles reaching 2.07 million Units Sold
Light Vehicles Sales vs Production (Russia, Ukraine, Belarus and Uzbekistan), 2006
2,000,000
1,500,000
1,000,000
500,000
--
500,000
Russia
+16.9%
+36.1%
Ukraine
1,000,000
1,500,000
2,000,000
+5.9%
+25.0%
Ukraine demonstrates
outstanding performance
both in sales and
production of the vehicles
Belarus
Production
Sales
+19% Uzbekistan
+38.7%
• Russian and Ukraine demonstrate outstanding performance in terms of production of the
passenger cars and corresponding sales.
17
1,658 thousand
units
50.2
144.2
1,068 thousand
units
Others
41.8
87.8
China
Japan
Korea
EU
Production, thousand units
Production Forecast of Passenger Cars in Russia by Manufacturer
Country of Origin: 2005 - 2012
0.3
111.3
57.3
14.8
72.1
52.1
78.3
85.7
122.8
142.3
25.3
9.9
33.3
32.3
182.1
48.7
41.1
95.5
125.8
196.8
212.0
153.4
269.0
113.9
152.1
168.5
178.2
198.2
220.5
216.8
292.1
975.0
910.3
877.9
225.5
346.5
886.0
756.7
741.6
733.7
606.1
622.3
f2011
f2012
USA
Russia
2004
2005
f2006
f2007
f2008
f2009
f2010
• Mass entry of foreign OEM’s will support increasing market sales and long term market
potential. Based on JD Powers Estimations for Vehicle Manufacturers in Russia
18
Trend
300,000
Production of vehicles Roslada to
be seized
250,000
Capacity, units
200,000
150,000
100,000
50,000
• While majority of the foreign OEMs in
Russia are expected to increase
production capacities in the next 8
years, Russian and CIS OEMs still
have extra capacities
25,000
R
en
au
lt
R
os
S
la
ev
da
er
st
al
A
ut
o
Ta
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Z
To
yo
V
ta
ol
ks
w
ag
en
th
er
O
A
Z
re
at
W
al
l
Iz
hA
ut
o
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vt
oV
M
M
-A
G
Z
A
G
Fo
rd
lta
i
A
Z
vt
ot
or
A
f2012
G
2005
A
ut
ok
om
0
A
Current Capacities Versus Projected: Autokom and Roslada Might
Seize Production of Passenger Vehicles
Roslada Production Volumes
20,000
15,000
10,000
5,000
0
2004
2005
2006
2007
2008
2009
2010
19
Production/ assembly Clusters are Located Around Moscow, St
Petersburg and Samara
Hyundai
Planned places for OEM’s (2008)
Existing OEM’s (2008)
Mapping of the Passenger Car OEMs
FORD
Toyota
UAZ
Nissan
BAIC
Opel
KIA
BYD
BMW
GM
AvtoKOM
Avtoframos
Chery
PSA
Samand
LADA
Hyundai
AvtoVAZ
Ssang Yong
KIA
● St. Petersburg
Mitsubishi
 Moscow
Minsk 
● Kaluga
BEL
● Lutsk
● Uzhgorod
IZH-Avto
LADA
● Izhevsk
Uliyanovsk●
Nab. Chelny ● ● Elabuga
Samara ●
UKR
● Zaporozhie
AvtoVAZ-Magna
● Taganrog
Mercedes Benz
Dadi
Chevrolet
ZAZ
Chery
LADA
Geely
Novouralsk ●
Ust-Kaminogorsk●
KAZ
● Cherkesk
OPEL
Tata
FAW
Fiat
Great Wall
Hyundai
KIA
VW
GM - AvtoVAZ
GAZ
VW
Kaliningrad ●
RUSSIA
Renault
AvtoVAZ
UZB
Skoda
● Asaka
GM
* PSA and Mitsubishi are expected to have a joint production in Kaluga
20
Production/ Assembly Clusters are Located Around Naberezhnie
Chelny and Nizhny Novogorod
Mapping of the CV and Bus OEMs
Planned places for OEM’s (2008)
Existing CV OEM’s (2008)*
Existing BUS OEM’s (2008)*
Scania
Hyundai
KAAZ
RUSSIA
Semar
PAZ
Volvo
GAZ
LiAZ
ZIL
Kaliningrad ●
BZKT
MAZ
BelAZ
MoAZ
Bogdan
Huyndai
Minsk 
BEL
● Lutsk
URAL
● St. Petersburg
KAMAZ
● Izhevsk
Kanash●
Uliyanovsk●
Miass ●
Nab. Chelny ● ● Elabuga ● Kurgan
 Moscow
Samara ●
● Bryansk
● Kaluga
UKR
● Zaporozhie
● Uzhgorod
● Kremenchug
● Taganrog
● Cherkesk
AvtoKRAZ
Cherk. Avt.
Zav
Cherk. Avt.
Zav
IVECO
UAZ
Evo Bus
Hyundai
Hyundai
KAVZ
NEFAZ
Tata
Novouralsk ●
Ust-Kaminogorsk●
KAZ
AvtoVAZ
UZB
● Asaka
ZAZ
ZAZ
* Companies that have minor production volumes are not included
21
Overview of Russian Holding Groups
4 large Holding Groups are Currently Present in Russia, which
Control 46 per cent of the Sales in the Russian Automotive Market
“GAZ” Group
One of the largest holding groups in Russia. After restructuring of the original
company. In 2005, RusPromAvto separated GAZ as well as a set of interrelated
automotive companies into separate entity as GAZ group. Group “GAZ” is now
engaged in the production of passenger vehicles, LCV, buses, auto
components, trucks, and specialised CV’s.
Severstal Avto
/ Sollers
ZMA company is the base of Severstal Avto operations. Severstal group produces
LCV’s, segment “A” vehicles (e.g. OKA), SUV both as local brands and foreign
brands (e.g. SsangYoung), and powertrains. Severstal Avto has strong
determination toward partnership both with Korean (ISUZU) & Chinese OEM’s
(SsangYoung) and with FIAT group. Severstal Avto was renamed to Sollers in 2008
AvtoVAZ
KAMAZ
AvtoVAZ is the biggest Russian passenger car and SUV car manufacturer whose
sales exceed 620 thousand units annually. AvtoVAZ has formed a JV with GM for
the assembly of SUV under joint brand. The government of Russia is the company’s
biggest shareholder. AvtoVAZ experiences continuous top management rotation.
Located at Naberezhny Chelny, Kamaz is one of the largest heavy-commercial
vehicles manufacturers in Russia. Kamaz has formed several partnership with
foreign suppliers (ZF, Cummings and others) who supply Kamaz with high quality
components.
22
Overview of Ukrainian and Byelorussian Companies
Other CIS Markets are Dominated by Smaller Number of the Holding
Groups or Large Companies Compared to Russia
Ukraine
UkrAvto
UkrAvto is the largest automotive holding groups in Ukraine that owns number of
the Ukranian automotive companies both OEM (ZAZ) and Tier 1 & 2 Suppliers.
Mercedes Benz, GM, Chery are assembling their vehicles in Ukraine in the facilities
of the UkrAvto. At the same time, UkrAvto is involved into active negotiation with
other foreign OEMs in localization of vehicle production in Ukraine.
Bogdan
Bogdan is privately operated automotive group that is focused on the production of
the buses, commercial vehicles and passenger cars in Ukraine. Company localised
production of several foreign brands on its facilities (VW, Hyundai group). Bogdan is
expected to expand its operation in Russia by developing new production location
for the assembly of the number of foreign brands in Russia.
Belarus
MAZ
MAZ is state controlled enterprise in Belarus that is focused on the production of the
heavy commercial vehicles, buses and special vehicles. MAZ controls a number of
tier 1 & 2 suppliers in Belarus. Currently, the future of the MAZ is not clear as the
company is expected to go public and number of companies (Russian OEMs) are
expected to take over the company in the next 8 years.
23
3. Overview of the Russian and CIS Design and Engineering
Market
•
Key Features of the Russian and CIS D&E Market
Slide 25
•
Roadmap of D&E Market Development
Slide 27
•
Understanding of Currents Needs by Local Companies
Slide 28
•
Analysis of Structural Changes in D&E Sector
Slide 29
•
D&E Market Drivers and Restraints
Slide 30
•
Key Market Trends
Slide 33
•
Key Market Challenges for D&E Sector
Slide 34
•
Idiosyncrasy of Doing Business in Russia
Slide 35
•
Market Size and Forecast for D&E Sector in Russia and
Slide 36
CIS Countries
24
• For the past 3 years, Russian and CIS OEMs and
Tier 1&2 suppliers were forced to pay closer
attention to their market position as foreign
transplants start to dominate in the market.
• Sluggish sales in the 90s and beginning of new
millennium constrained the development of Design
and Engineering services due to significant
underinvestment into D&E and loss of skilled
personnel (transfer to other industries).
• Russia traditionally holds the strongest position on
the CIS market and is the current leader in terms of
investments into new product development, test and
validation as well as manufacturing engineering.
• Currently, Russian and CIS D&E market players
have 10-15 years lag behind the expertise level
developed by the foreign providers.
Market position
for DEG members
R&D departments
of AvtoVAZ, GAZ,
KAMAZ, UAZ
and others
R&D departments
of Tier 1&2
suppliers
Specialised
laboratories
and research
centres
Specialised
research
centres
OEMs
Tier 1&2
Suppliers
Minor position
of Russian
independent
D&E
companies
D&E Investments
• Russian & CIS OEMs and suppliers play leading
roles in the market for the D&E services.
Automotive
Research
Institutes
Universities with
Automotive &
Transportation
Departments
D&E Influence
Design and Engineering Market Overview
Key Features of the Russian and CIS D&E Market
25
Strong Sales of OEMs and Tier 1&2 Suppliers Facilitate
Development of the Russian and CIS D&E Market
...
2007
2015
Russian and CIS Automotive and D&E Markets Size (CIS), 2007 and 2015
€ 65.10 billion
€ 31.40
billion
€ 157.5
million
1,650
vehicles
€ thousand
85.7
million
0.24% of
market
0.27% of
market
Russian and CIS Russian CIS
Total turnover
Vehicle Sales
Automotive
D&E
Market
Market
Russian and CIS
Automotive
Market
Russian and
CIS D&E
Market
• By 2006, the total turnover of the Russian and CIS Automotive market exceeded €31.40 billion, while
D&E market turnover reached €85.7 million.
• Development of the Russian Design and Engineering market strongly correlated with market growth of
the key Russian and CIS OEMs and Suppliers.
• Increasing sales of the foreign OEMs in Russia and CIS is expected to decrease the proportion of D&E
spends compared to the total market turnover from 0.27 per cent in 2007 to 0.24 per cent by 2015.
26
Russian and CIS D&E Market Undergoes Structural Changes
2015
• Despite domination of the foreign OEMs, Russian
OEMs hold their niche with help of foreign partners
and through active development.
• Competition and legislative environment forces companies to
invest into development of D&E.
• Outsourced D&E market peaks.
• Economic revival increases market sales for both passenger cars and
commercial vehicles.
• Mass entry of the foreign OEMs and Suppliers.
• Automotive industry begins to refocus on the core business activities.
• Large industrial companies are spliced into number of the smaller
businesses, companies started to invest into D&E including outsourcing.
2010
2006
2003
1998
1993
1991
1990
1991
• Economic crisis in Russia leads to collapse of the largest corporations
including automotive sector.
Phase Three
2007 - 2015
Phase Two
2003 -2006
• Inflation and general economic downturns quickly disrupt sales of the
new vehicles in Russia and other CIS markets.
• OEMs and suppliers refocus their business activities; lack of financing.
• Collapse of the Soviet Union separates the unified automotive industry.
• OEMs and Tier 1&2 suppliers become widely dispersed across newly
independent countries with independent D&E departments.
• Large industrial parks with developed infrastructure.
• Full support by the state of D&E activities and grants to OEMs.
Phase One
1991 - 2002
2015
27
Widening Gap Between Russian & CIS and Foreign Companies Forces
Local Players to Look For Partnerships in D&E
•
“Outsourcing is
in demand now
and this
tendency will
grow”
Kamaz
“In Russia, every
company has its own
D&E centre. They are
mostly very small and
are not powerful
enough for the tasks
to be completed”
Tier 1 Supplier
“Outsourcing is
always in demand
in any company.
It’s impossible to
do everything by
ourselves”
“In the
emergency
case, we may
ask for help and
still if we do it
we would ask
mainly Russian
companies”
While most of the local companies realizse there is a
need to collaborate with foreign D&E service
providers, there is some resistance found from the
side of in-house D&E departments.
”Well, I may only say that Russian OEM will not pay
for engineering, its clear and simple - no way!”
Tier 1 Supplier
Expectations of the local companies toward
D&E services
AMO ZIL
Strategic Decisions
• Develop in-house
D&E capabilities?
• Partner with foreign
OEMs and Suppliers?
• Collaborate with
foreign D&E service
providers?
High value for money
Expertise level for each Product
Domain
Understanding of the local needs of
the suppliers
IT expertise
Complex solution
GAZ Group
Presence of the Russian speaking
representative
Understanding of the Current Needs
in D&E in Russia and CIS countries
28
Technology Complexity
High
Specific
Problems
Russian OEMs
Generic
Problems
Universities
Low
Russian and CIS companies are looking for
complex technological solutions for both
solving specific problems and providing full
scope support in developing/enhancing
product lines.
Application Scope
DEG members
Institutes
Structural Changes in the Russian Automotive Market Impact D&E
Sector
• SMMT/DEG companies are positioned as a
providers of complex technological solutions
that could be used both for specific problem
solving (E.g. testing for EURO4 of gasoline
engine) as well as for enhancing the existing
product lines.
• The larger Russian OEMs such as
AvtoVAZ, GAZ, and Kamaz have large D&E
departments, however they lack critical
knowledge in certain D&E areas.
• Through Governmental support, automotive
research institutes and universities are
involved into specific problem solving for
automotive industry such development of the
competitive diesel engines.
Local independent Design and Engineering
companies are focused in providing support in:
• Exterior design: cabin design, face lifting
etc.
• Interior design: instrumental
clusters, interior lighting etc.
• Specific systems design and engineering.
29
Macroeconomic
Stability
Extension of
existing product
lines
Drivers
Increasing demand for new
vehicles
Favourable
conditions for
OEM‟s
Restraints
Key Market Drivers and Restraints for D&E Market
Key Market Drivers and Restraints for Development of D&E Sector in
Russia and CIS
Large
investments
Intensification
into
of competition modernisation
Close nature of (passenger car
of production
the Russian and
segment)
facilities
CIS automotive
industry
Undeveloped
auto
component
industry
Potential
growth of
investments
into R&D
Resistance
from in-house
D&E
departments
Demand for
local
components
Lack of
experience of
collaboration
with foreign
partners
30
Demand Growth for the New Vehicles Spurs Market Development
Drivers
Key Market Drivers for D&E Market
Increasing demand for new
vehicles
Favourable
conditions for
OEM‟s
Macroeconomic
Stability
Extension of
existing product
lines
Potential
growth of
investments
into R&D
Demand for
local
components
Key Market Drivers
• Slowly increasing prosperity of the Russian and CIS population facilitates market sales for new
vehicles thus allowing OEMs and Tier 1&2 Supplier to devote large budgets for D&E.
• State policy toward further development of Russian and CIS automotive industry creates attractive
investment conditions for vehicle and components manufacturers.
• Russian and CIS economy has left behind turbulent state and has reached stable growth stage.
• Increasing competition from the side of the foreign OEMs and suppliers, force Russian and CIS
companies to expand their product lines to tackle consumer demand.
• Introduction of EURO3 requirements forces technological advancement of local OEM’s and make
Russian and CIS automotive industry healthier.
• Increasing production volumes of vehicles both by Russian and CIS OEMS and foreign transplants
require corresponding development of the Tier 1 & 2 suppliers.
31
• Most of the Russian and CIS companies remain to be very close and non transparent for their foreign
partners.
• Intensification of the competition from the side of the foreign transplants negatively affect growth of the
Russian and CIS automotive companies.
• Russian and CIS companies have significant production facilities with high wear rate that require quick
modernisation to match business needs thus limiting investments into D&E.
• There is a large number of the components suppliers in Russia and CIS countries that have limited
resourced for D&E.
• Russian and CIS companies still follow complicated approach in administration and management of the
companies thus causing confusion in collaboration with foreign partners.
Restraints
Key Market Restraints for D&E Market
Close Nature of the Russian and CIS Companies Limits Growth of the
D&E Sector
Intensification
of competition
Close nature of (passenger car
the Russian
segment)
and CIS
automotive
industry
Large
investments
into
modernization
of production
facilities
Undeveloped
auto
component
industry
Resistance
from in-house
D&E
departments
Lack of
experience of
collaboration
with foreign
partners
32
Key Market Trends in D&E in Russia and CIS Countries
Outsourced D&E Services Have Strong Potential for Growth in the
Next 4-5 Years
Key Market Trends (Russia and CIS), 2006-2015
Market Trend
1-2 Years
3-4 Years
5-6 Years
High
High
Medium
High
High
Medium
Medium
High
High
Consolidation of the market.
Medium
Medium
High
General improvement of business environment and normative
Medium
Medium
High
Tightening of competition across the segments.
Low
Medium
High
Low
Medium
High
Entry of foreign D&E providers to the Russian and CIS
markets; intensification of collaboration with local OEMs and
suppliers.
Accelerated growth of design and engineering sector.
Modernisation of the production facilities to support market
sales.
legislarure.
33
D&E Market Challenges in Russia and CIS Countries
Absence of Market Transparency Restricting Development of
Competition in the Russian and CIS D&E Market
Probability
D&E Market Challenges (Russia and CIS), 2007
Possibility of market turmoil similar to the Russian government default
of 1998.
Low
Lack of professionals in industry would persist.
Low
Investment climate would worsen due to non-competitive and questionable
steps followed by the State authorities in regulating business environment.
Absence of market transparency and administrative barriers limiting
development of the Russian and CIS outsourced D&E market.
Non-competitive measures undertaken by the local government toward
foreign suppliers and D&E service providers.
Low
Medium
Medium
34
Idiosyncrasy of Doing Business in Russia and CIS: Local Business
Environment Features to Be Aware Of
Presence of talented
young engineers
however strong training
is required.
Mutual misunderstanding
of business cultures both
in Russian and Foreign
companies slows down
business development.
Relaxed attitude of
Russian companies
toward market
measurements and
forecasts.
Insufficient transparency of
Russian companies leads
to unreliable selfrepresentation of existing
contracts, capacities and
financial resources.
Poor command of
foreign languages
(English) in particular
regions.
Relative reluctance of
investing in tooling,
equipment, or
engineering by local tier
1&2 suppliers.
• Russia becomes more open
economy, which spurs
today‟s entry of foreign
enterprises despite existing
negative obstacles .
Possible delays with
financial payments while
Russian companies are
interested in
prepayments on
contracts.
High beauracracy in
Governmental bodies
increase time spans and
financial expenses.
• Efforts of Russian
Governments to facilitate
the development of
Automotive industry
create attractive
conditions for foreign
companies to set up local
presence.
Investments into Design and Engineering Services Expected to Grow
157.5 million EURO
7.9 per cent by 2015
0.1%
CAGR : 7.9%
85.7 million EURO
0.5%
5.8%
1.8%
1.8%
Investments into D&E by Key OEMs, 2015
50
45
40
90.7%
Investments (Million EURO)
Design and Engineering Sector Overview
6.8%
35
91.3%
30
25
20
15
10
5
0
2007
Avtovaz
GAZ
KAMAZ
Others
2015
• In 2006, the total turnover of the Russian and CIS Automotive markets exceeded €31.40 billion while
D&E market turnover reached €85.7 million.
• CAGR growth for the next 8 years of D&E market in Russian and CIS countries is expected to account
for 7.9 per cent.
36
4. Strategic Analysis of the Outsourced D&E Market
•
Overview of the Russian and CIS Outsourced D&E Market
Slide 38
•
Key Market Features
Slide 39
•
Key Market Drivers and Restraints
Slide 40
•
Key Trends for Outsourced D&E Market in Russia and CIS
Slide 43
•
Key Market Challenges
Slide 44
•
Outsourced D&E Market Size and Forecast
Slide 45
•
Structure of Outsourced D&E Market in Russian and CIS
Slide 47
•
Features of Outsourced D&E Market By Sector
Slide 48
•
Process of Product Development at AvtoVAZ
Slide 52
•
Competitive Forces Analysis
Slide 53
•
Mapping of Local Needs
Slide 55
37
Outsourced Design and Engineering Sector Overview
Outsourced D&E Market is Expected to Increase in the Next 8 Years
and Reach 58 per cent of Overall D&E Market In Russia and CIS
...
2007
2015
CIS D&E Markets Size (CIS), 2007 and 2015
€ 157.5 million
€ 85.7
million
€ 92.1 million
1,650
vehicles
€thousand
38.5
million
58% of
market
45% of
market
Russian andTotal
CIS turnover
Russian
and Sales
CIS
Vehicle
D&E Market
Outsourced D&E
Market
Russian and CIS
D&E Market
Russian and CIS
Outsourced D&E
Market
• Outsourced D&E market has strong potential in Russian and CIS countries being capable to potentially
generate up to €38.5 million in turnover by the results of 2007.
• Outsourced Design and Engineering services have strong growth potential in the next 8 years reaching
€92.1 million in turnover that represents almost 140 per cent increase compared to the level of 2007.
38
Outsourced Design and Engineering Sector Overview
Intensification of the Competition in the Industry Forces OEMs and
Suppliers in Russia and CIS to Consider Outsourcing D&E Services
• Slipping sales of the local OEMs forces companies to look for potential areas of improvement (in
particular in Design and Engineering sphere) as well as to expand existing product line.
• Changes in perception of quality and service level transform consumer preferences and patterns
thus forcing OEMs to increase quality requirements for local suppliers (ISO certification in
production and management, decrease number of defect items in the shipments).
• Despite current level investments into design and engineering, local OEMs and Tier 1 suppliers
are expected to increase the financing of R&D, including outsourced Design and Engineering
services in the upcoming years.
• Main Russian and CIS OEMs, such as AvtoVAZ, GAZ, and KAMAZ, have large teams engaged
into development of the new products.
• There is high utilisation of CAE/CAD systems (CATIA v4 and V5) by major OEMs in
Russia, however there is a lack of integrated approach (PLM) in D&E.
• Russian OEMs and Tier 1 suppliers are aware of potential benefits of cooperation with DEG
members (e.g. UltraMotive – project with GAZ Group).
In the next 1-2 years, Russian Governments plans to allow local companies to allocate D&E
expenses into the costs thus increasing growth of D&E sector
39
Drivers
Lack of in-house
technological
expertise by OEMs Increasing sales
allows increase Increasing quality
and Suppliers
financing of
concerns and
outsourced
requirements for
projects
suppliers
product lines
requires new D&E
approach
Restraints
Key Market Drivers and Restraints for Outsourced D&E Market
Despite Presence of the Large In-house D&E Departments, Russian
and CIS Companies Lack Up-to-Date Expertise Level
Low D&E spends
compared to the
other developed
markets
Complicated
organisational
processes raise
barriers for
efficient
collaboration
Government
supports
investments
into D&E
Lack of experience
Partnership with in collaboration
with foreign
Language barriers foreign OEMS and
suppliers
slows
partners
still negatively
penetration
of
the
affect
foreign D&E
communication
providers
between
organisations
40
Drivers
Lack of In-House Expertise is a Key Driver for Outsourced D&E
Market Growth
Lack of in-house
technological
sales
expertise by OEMs Increasing
Increasing quality
allows
increase
and Suppliers
concerns and
financing of
requirements for
outsourced
suppliers
projects
product lines
requires new D&E
approach
Government
supports
investments
into D&E
Key Market Drivers
• Russian and CIS OEMs and suppliers lack up-to-date expertise in D&E (latest technologies in
particular).
• Gradual sales growth of the Russian and CIS companies allows companies to allocate large budgets for
outsourced D&E.
• Increasing competition in the OE sector increases pressure on the local supplier for quality of the
product thus driving needs of the suppliers for D&E and outsourced D&E in particular
• To tackle competitive pressure from the side of the foreign transplants, Russian and CIS OEMs realise
not only the need in the product line expansion but also the need in qualitative change of the products
produced.
41
• While foreign OEMs spend around 4-5 per cent of the revenues on D&E, only largest Russian and CIS
companies can afford large D&E spends but not exceeding 0.5-1 per cent of their revenues.
• Local administration and management practices create confusion and misunderstanding between
foreign and local partners thus leading to inefficiencies.
• Language skills remains one of the barriers that limit efficient communication between partners and
lead to longer project times.
• Russian and CIS companies are actively involved into creation of the partnerships with foreign OEMs
and suppliers in order to improve their technological level.
Restraints
General D&E Spends By Russian and CIS Companies Remain Low
Low D&E spends
compared to the
other developed
markets
Complicated
organisational
processes raise
barriers for
efficient
collaboration
Lack of experience
Partnership with in collaboration
with foreign
Language barriers foreign OEMS and
suppliers slows
partners
still negatively
penetration
of
the
affect
foreign D&E
communication
providers
between
organisations
42
Outsourced D&E Market is Expected to Accelerate its Growth in the
Next 3-4 Years
Key Challenges for Outsourced D&E Market
Key Market Trends (Russia), 2006-2015
Market Trend
1-2 Years
3-4 Years
5-6 Years
suppliers for outsourcing D&E services.
High
High
Medium
Accelerated growth of Design and Engineering sector.
High
High
Medium
Partnership with foreign OEMs and supplier to achieve
High
High
Medium
High
High
Medium
Medium
Medium
High
Tightening of competition across the segments.
Low
Medium
High
Low
Medium
High
Increasing budgets allocated by Russian and CIS OEMs and
technological gain.
Increase in scope and size of the project carried out by
independent D&E companies.
General improvement in operational and administative
spheres of the local companies.
43
Key Challenges for Outsourced D&E Market
DEG Members Activities in Russia are Challenged by Increasing
Cooperation of OEMs and Suppliers with Foreign Producers
Slipping sales of
the Russian
companies
Expansion of
cooperation with
foreign OEMs and
Suppliers
Shift to assembly
of the foreign
brands in Russia
and CIS countries
Challenges
for
DEG members
General business
and legislative
environment
Slow development
of the local OEMs
and suppliers
44
Strategic Analysis of the Outsourced D&E Market
Scenario Analysis – Key Assumptions
CAGR 7%
scenario

Weak economy with
lower potential growth.

Economic growth rates will
remain unchanged.

Shift to assembly of the
foreign brands by
Russian OEMs.

Development of
automotive industry will
follow current plans.
Conservative
Scenario
CAGR 16%
scenario
CAGR 12%
scenario
Frost & Sullivan
Scenarios

Substantial
structural/qualitative
changes in the economy
will be achieved.

OEMs will accelerate D&E
spends.
Optimistic
Scenario
Pestle Assumptions:
• Increasing purchasing power of the population of Russia and CIS market drive the development of the automotive
market.
• Tightening ecological requirements (EURO 4 in 2010) put tremendous pressure on the capabilities and production plans
of the Russian OEMs.
• In Russia, stable political situation and general economic growth facilitates positive changes in economic and legislative
environment.
Demand side Assumptions:
• Highest budgets for outsourced D&E services are expected to come from the largest Russian OEMs in passenger and
CV segments.
• Russian OEMs are expected to continue production of the local brands and further expansion of the product line.
Supply side Assumptions:
• Market share of the local independent D&E companies is expected to remain low.
Millions EURO
Scenario Analysis – Russian and CIS Outsourced D&E Market
140
120
Growth Phase
CAGR :16%
100
CAGR : 12%
80
60
CAGR : 7%
40
20
-
2007
2008
2009
Conservative Scenario
2010
2011
2012
Frost & Sullivan Scenario
2013
2014
2015
Optimistic Scenario
•
Frost & Sullivan expects that stable growth of the outsourced D&E market in Russia and CIS countries will continue .
•
CAGR growth from 2007 to 2015 is expected to account for 12 per cent (Frost & Sullivan scenario) as no major
disturbances on the market are expected.
•
Russian and CIS market for outsourced D&E services is expected to reach highest growth in the next 3 years averaging
26 per cent growth for that period.
Note: Base Year is 2007. CAGR calculated only for the forecast period between 2007 and 2015
Overview of Outsourced D&E Market by Area
Manufacturing
Engineering
15%
Test &
Validation
10%
Design
30%
Product
Engineering
45%
Design and product engineering valued
€28.8 million in 2007
Design
• Exterior and interior design of the Russian made vehicles
has been traditionally week area for the Russian and CIS
OEMs.
• Expansion of the product lines requires significant
investment into redesign of existing products (facelifting), interior, comfort and others.
Product Engineering:
• Need to follow market development forces OEMs and
suppliers to invest into product engineering.
• In the areas such powertrain, chassis, transmission and
braking systems, local companies require assistance from
foreign partners.
Test and Validation:
• Tightening ecological requirements requires local companies
to look for the support in preparation for EURO 4-5
implementation.
• Strong demand for the test-beds.
Manufacturing engineering:
• Expansion of the product lines or reorganisation of the
existing production facilities, restructuring of organizational
processes is required by local players.
• Situation in the Russian automotive industry forces
local OEMs and Tier 1&2 suppliers to search for the
solutions in the all design and engineering areas.
“Foreign design and engineering
service providers have to consider
what Russian companies about to
do to understand the areas for
potential cooperation”
Industry Expert, Russia
47
Russian and CIS Companies are Primarily Interested in Interior and
Exterior Design
Overview of Outsourced Design Sector
Key Areas for Collaboration:
• Exterior and interior design of the Russian made vehicles
has been traditionally week area for the Russian and CIS
OEMs.
• Expansion of the product lines requires significant
investment into redesign of existing products (facelifting), interior, comfort and others.
• Russian and CIS companies across all segments (passenger
cars, commercial vehicles and suppliers) show interest in
cooperation with foreign providers with strong experience in
design.
• Market for outsourced design services in Russian and CIS
countries is estimated to reach €11.5M in 2007.
Main areas of interest
for collaboration with
DEG members:
KAMAZ:
GAZ:
URAL:
UAZ:
SAAZ:
Passenger Cars
•
•
•
•
Dashboards
Exterior and interior lights
Face-lifting
Concept design and virtualization
Commercial Vehicles
• Interior cabin design
• Cabin concept design
Components Suppliers
• Virtualization of the systems
• CAD
Cabin interior and exterior design, complex support in CAD
Concept design, 4x4 LCV platform design
Truck design, cabin design
SUV exterior and interior design for the new vehicle
Virtualization of the suspension elements
48
Overview of Outsourced Product Engineering Sector
Tightening Ecological Requirements in Russian and CIS Countries
Force Local Companies to Focus on Engineering of New Engines
Key Areas for Collaboration:
• Russian and CIS OEMs and suppliers are involved into
expansion of the product range in order to overcome
increasing competition from the foreign OEMs and suppliers.
• Local companies realize that there is no time left for gradual
improvement of existing products and components thus
relying on potential support from D&E providers.
• DEG members activities in Russia and CIS are expected to
be challenged by the increasing collaboration between local
and foreign OEMs and suppliers as local companies rely on
technology transfer from the foreign collaborators.
• Market for outsourced product engineering services in
Russian and CIS countries has the largest potential and is
estimated to reach €17.3M in 2007.
DEG members:
SeAZ:
UMZ:
AvtoVAZagregat:
SAAZ:
ZMZ:
URAL:
Passenger Cars
• Re-engineering of the existing
components to improve quality
Commercial Vehicles
• Chassis engineering
Components Suppliers
•
•
•
•
•
•
•
Suspension systems
Steering systems
Braking systems
Exhaust system
Electric and electronic systems
Gasoline and diesel engines
Hybrid engines
Chassis modernization, braking and steering systems
Gasoline engine modernization, hybrid engine
Low cost exhaust systems and converters
Suspension elements
Engines
Car and chassis modernization with EURO 3-4 engines
49
Overview of Outsourced Test & Validation Sector
Shift to EURO 5 in 2014 Requires Significant Resources in Testing
Engines Developed Locally
• Increasing quality requirements increase demand from OEMs in purchase the test beds. Frost &
Sullivan estimates that in the next 5 years Russian and CIS OEMs will require acquisition of 2025 specialised test beds for their production lines.
• Need to increase product line expansion requires local companies to shift to virtual testing of the
products, however, local OEMs and suppliers are lacking expertise and knowledge of working in
virtual environment.
• Along with virtual testing, mathematics and structural calculations are needed to be implemented
by the local players.
• Implementation of EURO 4 and 5 in the next 6 years requires both powertrain suppliers and
OEMs (involved in production of engines) to test their products for compliance. Foreign D&E
providers with expertise in this domain are expected to actively engage in collaboration with
Russian and CIS companies.
DEG members:
SeAZ:
UMZ:
SAAZ:
GAZ:
KAMAZ:
Test beds
Testing for EURO 4-5 engines
Test & Validation of suspension elements
Test & Validation on the component level
Testing for EURO 4-5 engines
50
Overview of the Outsourced Manufacturing Engineering Sector
Detailed Features of the Manufacturing Engineering Market
Defects PPM level for the
automotive components
systems produced in Russia
and CIS countries is very high
compared to the foreign
standards
• High defects level negatively effects perception of the local components suppliers.
• Foreign OEMs entering Russian and CIS markets are looking not only for the reliable partners but
also for corresponding quality level.
• Situation in the Russian and CIS automotive industries forces local OEMs and Tier 1&2 suppliers to
search for the solutions in the all design and engineering areas including manufacturing
engineering.
51
Process of Product Development at AvtoVAZ
• AvtoVAZ being one of the largest manufacturers of the passenger cars in Russia and CIS countries
with annual output of more than 680,000 vehicles offers significant opportunities for the outsourced
D&E market.
• AvtoVAZ has a long history of the collaboration with foreign companies in D&E of the new vehicles.
• Acquisition of the 25 per cent stake of the AvtoVAZ by Renault is expected to improve the
technological level of the company in the long run.
Case Study: Product Development Approach by AvtoVAZ*
• AvtoVAZ took design from
Fiat 124
• Minor restyling was made
• Successor models followed
design line of VAZ 2101
Project length: 4 years
Product Development
VAZ 2101 …
1970
• AvtoVAZ decided to
revive product line
• New model was
designed together with
Porsche
• Initial work started
jointly with foreign D&E
company but was
cancelled
• AvtoVAZ redesigned
model independently in
beg. of 2000
Project length: 6-7 years Project length: 9 years
VAZ 2108 “Samara”…
Started in 2006, but
currently put on hold
Project C and others…
Lada Kalina…
1984
• Number of independent
and joint (Magna Int)
projects were announced
• Via collaboration with
Renault, AvtoVAZ is
expected to benefit through
technology and expertise
transfer
2005
200?-20??
Mass production
52
Competitive Forces Analysis of the Russian Outsourced D&E Market
Buyers (OEMs and Suppliers):
1. Price sensitivity
2. Support from the Government
3. Strong need for cooperation
4. Lack of modern technologies
Substitutes:
1. Direct cooperation with foreign OEMs and suppliers
2. Licencing and technology transfer
3. Acquisition of foreign companies
4. Cooperation with other industries such as
Aerospace and Defense
Environment
Technology
Economic
Industry Competitors:
1. Lack of visibility on the market
2. Focus on the design and tooling
3. Small volumes
4. Absence of complex approach
Legal System
Development
Political
Socio-Cultural
Situation
Features
Entrants:
1. Favorable economic climate
2. Increasing experience of collaboration with
Russian companies
3. Complexity of working environment
4. High knowledge and experience level
Suppliers:
1. Restructuring of their own design &
engineering departments
2. Low qualitative and technological levels
3. Lack of expertise
4. Poor technological base
53
Strategic Attractiveness Analysis
Scoring System:
High Threat
1 points
Medium Threat
3 points
Low Threat
5 points
Threat of New Entrants
Treat Score: 3
Suppliers Bargaining
Power
Industry Rivalry
Buyers Bargaining
Power
Threat Score: 5
Treat Score: 3
Threat Score: 3
Threat Score: 2
Factor Scoring
Threat of New Entrants
3
Threat of Substitutes
2
Buyers Bargaining Power
3
Suppliers Bargaining Power
3
Industry Rivalry
5
Average
3.2
Overall Score: 16 points
Threat of Substitutes
• Russian Outsourced Design & Engineering market score of 16 out of
a maximum 25 can be considered attractive market place for DEG
members.
54
Design of the New Vehicles and Systems Along With Product
Engineering Are in Greatest Demand from DEG Members
• Despite current level investments into D&E, local OEMs and Tier 1 suppliers are expected to
increase the financing of R&D, including outsourced Design and Engineering services in the
upcoming years.
55
5.
Demand Side Overview
•
Key Features of the Russian and CIS Automotive Industry
by Market Segment
Slide 57
•
Structure of D&E Market
Slide 58
•
Overview of the Selected Companies’ Budgets for D&E
Slide 59
•
Competitive Position of the Key OEMs in Russia and CIS
Slide 60
56
Russian and CIS OEMs and Supplier are Looking for Collaboration
with Foreign D&E Providers
Overview of the Demand Side
• Situation in the Russian automotive industry forces local OEMs and Tier 1&2 suppliers to search
for the solutions in the all design and engineering areas
• Primary focus is given to the product engineering which hold 45 per cent of the outsourced D&E
market
Passenger Car
OEMs
Commercial
Vehicle OEMs
•
•
•
Intensification of competition in Russia and CIS countries
requires local companies to reconsider their business
strategies and focus on expansion of the product lines.
•
Tier 1 & 2
Suppliers
Intensification of competition in Russia and CIS countries requires local companies to
reconsider their business strategies and focus on expansion of the product lines.
Expansion of the product lines requires significant investment into redesign of existing
products (face-lifting), interior, comfort and others.
•
Product engineering has strongest demand from all the
Tier 1& 2 suppliers.
Foreign transplants require significant improvement of the
quality and number of defects (PPM).
We have range of
Russian companies
which are competing for
design and engineering
but as far as I know
there are no integrated
solutions for the time
being.
KAMAZ
57
Structure of the Russian and CIS D&E Market
22.5%
Rest of industry
stakeholders
Top 3
Russian and CIS D&E
Market (€85.7 million)
100%
AvtoVAZ
GAZ Group
Kamaz
3 Companies has the
largest budget for D&E
in Russia and CIS
countries
75.9%
• Largest Russian OEMs such
as AvtoVAZ, GAZ, and Kamaz
have large D&E departments
and capable to generate
substantial financial resources
to support them.
• Tier 1&2 suppliers are facing
difficult times as local OEMs
are tightening quality
requirements.
• In Russia, Government
supports research done by
specialised automotive
research institutes (NAMI)
and provides financial
support.
• Share of the local
independent D&E companies
is relatively small and does
not have strong impact on the
market.
2007
58
Overview of the Demand Side for Outsourced D&E Services
-
5
10
15
Millions EURO
20
MAZ
6.5%
Others
10.3%
AvtoVAZ
AvtoVAZ
39.0%
KAMAZ
18.2%
GAZ
Group
KAMAZ
GAZ Group
26.0%
MAZ
Others
• Despite current level investments into Design and Engineering, local OEMs and Tier 1 suppliers
are expected to increase the financing of R&D, including Outsourced D&E services in the
upcoming years.
• Main Russian CIS OEMs, such as AvtoVAZ, GAZ, and KAMAZ, have large teams engaged into
development of the new products.
59
Budgets of the Selected OEMs for the Outsourced D&E
Market Turnover
5,000.0
AvtoVAZ
4,000.0
GAZ Group
3,000.0
2,000.0
KAMAZ
1,000.0
MAZ
UAZ
Growth Rate
0.0
-10%
0%
10%
20%
30%
40%
50%
60%
-1,000.0
AvtoVAZ
GAZ Group
KAMAZ
MAZ
UAZ
Note: Bubble size represents the allocated budgets for outsourced D&E; Arrows indicates expected development
of the companies in the market
• Key Russian and CIS OEMs are expected to continue growth in the upcoming years with
corresponding increase in the budgets allocated for Outsourced D&E.
60
6.
Profiles of Key OEMs and Suppliers
1. SeAZ (AvtoKOM)
2. Avtopribor
3. UMZ
4. AvtoVAZagregat
5. Novgorod Autoagregat Plant
6. KZAE
7. Skopinsky Agregatniy Zavod
8. ZMZ
9. URAL
10. ZIL
11. Asia Auto
12. ZAZ
13. MAZ
14. YaMZ (Avtodiesel)
15. UAZ
16. GAZ Group
17. KAMAZ
18. KrAZ
19. NAMI
20. Autodesign
21. Avtoprostor
61
OJSC “SeAZ” (AvtoKOM Group), OEM
Business segments:
• Passenger cars
• Automotive components
• Others
Quality certification:
• ISO 9001:2000
Location and Performance
SeAZ
Key Products:
• SEAZ 11116 – “A” class passenger car
• Bumpers, plastic parts
Moscow ●
Employees: 1,400
Turnover:
€8.6 M
Growth Rate: -70% pa
Background Information:
• Before 2005, SeAZ was part of the AvtoVAZ group.
• SeAZ produces OKA passenger car with Tian Jin FAW, Chinese
engine.
Ownership Structure
• Main challenge for SeAZ is to revive production of OKA brand
through design of the new model.
• SeAZ is focused on the development/upgrade of the A class vehicle
for the low cost car segment with total production capacity increase
up to 50,000 - 100,000 vehicles.
OJSC “SeAZ” Capacities: 2007
Production
4,510 (-60%)
Capacity
34,400
Sales
3,454 (-70%)
Avtokom
100%
Market Position
SeAZ,
0.20%
Others,
99.80%
62
OJSC “SeAZ” (AvtoKOM Group), OEM
Implications and Opportunities for DEG Members
• SeAZ is a niche player that focuses on the development of low
cost car for the Russian and CIS markets.
• Currently none of their design and engineering is outsourced.
Interest in
Collaboration
-
+
Design Product Test & Manuf.
Other
Eng. Validation Eng.
• 9 people are involved into D&E at SeAZ.
• Only in 2002 completed transition to CAD (only 6 people familiar
with the system).
Figures:
D&E Budget:
Outsource D&E:
€0.3M
€0.18M
• In 2004, joint project with Multipass Business Ltd on the
redesign of OKA vehicles was unsuccessful and was cancelled.
• Very receptive for collaboration with DEG members and
company is ready to outsource 60% of its budget (€0.18M Euro).
annually
Main areas of
interest for
collaboration with
DEG members:
Image source: SeAZ
Chassis modernisation
Development of steering systems
Development of braking system
Modernization assembly line test beds
Challenges in development of existing and new models by SeAZ create opportunities for DEG
members
63
OJSC “Avtopribor”, Tier 1&2 Supplier
Business segments:
• Instrument Clusters & Dashboards
• Wipers
• Mechatronics
• Speedometers & Tachometers
• Technological equipment
Key Clients:
• Russia: All passenger and CV OEMs
• Foreign: ZAZ, MAZ
• ISO TS 16949
• ISO 14001:2004
Avtopribor
Vladimir●
Ford
5%
Others
18%
UAZ
6%
KAMAZ
GAZ
7%
8%
AvtoVAZ
36%
Aftermkt
20%
Employees: 4,000
Turnover:
€62M
Growth Rate: 10% pa
Ownership Structure
• Avtopribor is focused on the further improvement of its
market share in Russia and CIS countries.
• Expansion of the Avtopribor’s business segment offer
strong market opportunities for the company.
Avtohold
100%
Market Position
One of the leading suppliers of
instrumental clusters and
wiper systems in Russia
OJSC “Avtopribor”, Tier 1&2 Supplier
-
+
• Company has its own D&E facilities employing 60 people.
Interest in
Collaboration
• Tightening quality requirements of the local OEMs force company to
Other
focus on the product quality improvement.
• Avtopribor is implementing system of the “Lean Production”.
• Targeting foreign OEMs in Russia, Avtopribor collaborates with
Figures:
D&E Budget:
Outsource D&E:
€0.27M
NA
foreign suppliers Bosch, Magneti Marelli, Visteon, Valeo, and Mako.
• Interested in contract production or organisation of the production at
Avtopribor’s facilities.
• Company might outsource up to 5 per cent of the annual turnover.
• Open for cooperation and are interested in DEG members visit.
DEG members:
•
•
Image source: Avtopribor
Avtopribor is interested in partnering with DEG members
through creation of the joint ventures (JV)
Technology transfer
Frost & Sullivan expects that Avtopribor could be potentially interested in modernization of
equipment and reorganization of the manufacturing processes
OJSC “Ulyanovsky Engine Plant” (UMZ), Tier 1 Supplier
Business segments:
• Engines (gasoline)
• Engine components
• Boat engines and components
• Consumer goods
• ISO 9001:2000
• ISO 16949 (in progress)
Others
2%
Aftermkt
18%
GAZ
11%
Key Clients:
• Supply UAZ and GAZ
UMZ
Ulyanovsk●
Employees: 4,375
Turnover:
€52.9M
Growth Rate: NA
UAZ
69%
• In 2005, UMZ went bankrupt and was acquired by GAZ Group
• Company produces range of gasoline engines for passenger
cars (UAZ) and CV (GAZ).
• UMZ is focused on enhancing existing range of the products
through improvement of the quality, engine features and
adaptation to the tightening environmental standards.
OJSC “UMZ” Capacities: 2006
Production
61,018
Capacity
NA
Sales
60,978
Ownership Structure
GAZ
Group
100%
Market Position
NA
OJSC “Ulyanovsky Engine Plant” (UMZ), Tier 1 Supplier
• UMZ partially outsource engine engineering and testing to
the local companies (names are not disclosed).
• UMZ has experience in collaboration with foreign D&E
companies; UMZ works with Ultramotive on enhancing UMZ4216 engine range.
• Company needs to acquire new design and engineering
software (CAD/CAE) along with its support and training.
• Poor own test & validation facilities force company to search
for assistance of the D&E service suppliers.
• Company is not satisfied with current level of cooperation
with foreign D&E companies.
• UMZ is interested in collaboration with DEG members in
engine engineering/modernisation and test & validation
areas (to match EURO 4 requirements).
DEG members:
Interest in
Collaboration
-
Other
Figures:
D&E Budget: €0.05M (2006)
Outsource D&E: NA
Image source: UMZ
• Gasoline engine modernization
• Development of the new products and systems
• Hybrid engine development
• Test & validation for EURO 4 and EURO 5
UMZ offers number of opportunities for DEG members in preparation of the existing products for
EURO 4&5 certification along with modernization of the existing product range
+
OJSC “AvtoVAZagregat”, Tier 1 Supplier
Business segments:
• Seats
• Exhaust systems
• Catalytic converters
• Components for fuel and braking
systems
• ISO 9001:2001
• ISO 9001:2000 (in progress)
• ISO 16949 (in progress)
AvtoVazAgregat
Others
5%
Togliatti●
Key Clients:
• Primary customer is AvtoVAZ
•
•
•
•
•
Employees: 5,257
Turnover:
€230.8M
Growth Rate: 9.5% pa
AvtoVAZ
95%
Company has strong links with AvtoVAZ, being part of AvtoVAZ
group before 2000.
Supplies the final assembly lines of AvtoVAZ with an extended
range of components (400 items).
The most important items are seats (67% from total output)
and exhaust systems (18%). The remaining 15% are made up
by fuel and brake tubes (8%), catalytic converters (5%) and
other components.
Company expects to cover all range of the new models
produced by AvtoVAZ (Lada Kalina and Lada Priora).
Eberspaecher (Germany) is expected to launch production of
exhaust systems for Lada “Project C” on the facilities of
AvtoVAZagregat.
Ownership Structure
Lada
Inter
Service
NA
ZAO
Rusinkor
NA
Market Position
NA
OJSC “AvtoVAZagregat”, Tier 1 Supplier
• Primary focus is given to the extension of the product line in
particular for catalytic converters and exhaust systems.
• Key consideration factor for AvtoVAZagregat in partnering with
foreign D&E company is impact on the final price of the
systems developed.
• Product development is closely monitored by AvtoVAZ.
• Company uses AvtoVAZ’s testing facilities.
Interest in
Collaboration
-
+
Other
Figures:
D&E Budget: NA
Outsource D&E: NA
• Through assembly of Eberspaecher’s products company
expects to improve current quality and technological level.
• AvtoVAZagregat is interested in product engineering of low
cost catalytic converters and exhaust systems.
Image source: AvtoVAZagregat
DEG members:
• Engineering of low cost exhaust systems and catalytic converters
DEG members could benefit AvtoVAZagregat by providing existing solutions for improving
quality of the AvtoVAZagregat products
OOO Novgorod Autoaggregate Plant (NAAZ), Tier 1 Supplier
Business segments:
• Silencer for passenger cars and
CV
• ISO 9001:2000
Key Clients:
• Company is focused on aftermarket sales
Novogorod
Autoagregat Plant
Veliky
Novgorodi●
Employees: 4,000
Turnover:
N/A
Growth Rate: N/A
• NAAZ manufactures silencers for the wide range of the Russian
models including AvtoVAZ, GAZ, Moskvich, IZH-Auto and
others.
Ownership Structure
• Silencers are made using both stamp-welding and rolled
NA
technologies.
• NAAZ plans to expand the product range to target new models
produced by GAZ Group.
Market Position
NAAZ Capacities: 2007
Production
N/A
Capacity
N/A
Sales
N/A
NA
OOO Novgorod Autoaggregate Plant (NAAZ), Tier 1 Supplier
• NAAZ has its own D&E facilities including 2 qualified
designers employed.
Interest in
Collaboration
-
+
Other
• Most of D&E is done in-house with assistance of
NAMI and Nizhnegorodsky University.
• Company is investing into development of the new
Figures:
D&E Budget: NA
Outsource D&E: NA
technologies for silencers.
• Software in use at NAAZ includes Auto CAD 13th;
visualization is done in 3D Studio Max.
Image source: NAAZ
DEG members:
• Company is not interested in collaboration at the moment as inhouse D&E department has sufficient capacities
• NAAZ would consider D&E proposals
Despite lack of interest in collaboration with DEG members, increasing competition and
tightening quality requirements is expected to lead NAAZ for collaboration in product and
manufacturing engineering
OJSC “KZAE”, Tier 1&2 Supplier
Business segments:
• Electric motors
• Wiper systems
• Mechatronics
• Ignition systems
• ISO 9001:2000
• ISO 9001:2001
• ISO 16949
Key Clients:
• Russia: GAZ, URAL, SeAZ, UAZ, AvtoVAZ, Vazinterservice and others
• CIS: MAZ, ZAZ
KZAE
Kaluga●
Employees: 3,992
Turnover:
€53.3M
• OJSC KZAE focuses on design and manufacturing of
electrical equipment and appliances for the automotive
industry
Ownership Structure
• Following general trends in the Russian automotive supplier
industry, company is working on improvement of the product
quality, production facilities modernization
• Company expands its operation both as Tier 1 and Tier 2
supplier
• Increasing prices for the raw materials increase product price
and thus negatively affect the competitive position of the
company
Market Position
NA
OJSC “KZAE”, Tier 1&2 Supplier
Interest in
Collaboration
• KZAE targets to extend product line by designing and
manufacturing new products:
• HVAC systems
-
+
Other
Figures:
D&E Budget: NA
Outsource D&E: NA
• Wiper systems
• For the existing product line, KZAE is focused on:
• Re-design and modernisation of the product line
• Quality improvement
Image source: KZAE
DEG members:
Company is not interested in collaboration at the moment
OJSC "Skopinskiy Avtoagregatniy Zavod” (SAAZ), Tier 1 Supplier
Business segments:
• Shock absorbers
• Telescopic stanchions
• Struts, gas supports
ISO 16949
ROS RU MT 25B09909
ISO 9001:2000
Key Clients 2007 annual report:
• JSC ”AvtoVAZ” (shock
absorbers, telescopic stanchions)
• JSC ”IzhAuto” (telescopic
stanchions, struts)
• JSC "GM AvtoVAZ”
“AvtoVAZ”, 63.2%
Others, 34.2%
Export, 2.6%
Background Information
Others include IzhAuto and
GM-AvtoVAZ
• SAAZ is the largest manufacturer of struts, shock absorbers and gas
supports in Russia.
Skopinsky
Agregatniy
● Skopin
Employees: 3,072
Turnover: € 77,9M
Net profit in: € 0,038M
Ownership Structure
• The level of product defects per year is relatively low compared to other
Russian companies at 50 РРМ.
• To improve cost structure SAAZ is developing and upgrading its own
machine tools. Investment levels unknown however a positive sign to be
improve efficiencies.
• From 2008, SAAZ will produce automotive components for GAZ’s new line
up of Maxus and Siber models.
OJSC “SAAZ” Capacities: 2007
Production
8,5 ml pieces
CRA "Bank of Moscow" (JSC) 100%
Market Position
More than 70% of native cars in Russia
and the CIS countries exploit shock
absorbers made by JSC "SAAZ "
OJSC "Skopinskiy Avtoagregatniy Zavod“ (SAAZ), Tier 1 Supplier
• SAAZ " is an independent manufacturer with engineering facilities of its own
(Designing Service, Research Laboratory Group, Quality Control Department).
Interest in
Collaboration
-
+
Other
• Their R&D facility includes 10 designers (30% with good experience) with further
plans for expansion.
• The only Design and Engineering that is outsourced is from AvtoVAZ and two
foreign companies – further information not available.
Figures:
D&E Budget:
Outsource D&E:
Not Available
*
• In 2008 SAAZ plans technical re-equipment, new products lines and R&D testing
development to improve the quality of the production.
• The company shows positive interested in cooperation with DEG members and
are willing to share more details about their outsourced design and engineering at
that time.
Image source: www.z-saaz.ru
DEG members:
• Test and validation (including virtual T&V)
• Design and development of suspension elements
• Mathematic modelling for risk estimations, calculations
and construction optimization
Frost & Sullivan expects that the most interest for collaboration with DEG members is area of test
and validation of the existing product line
* Further details not available during interview however will provide during further discussion with DEG members
OJSC "Zavolzhsky Engine Plant” (ZMZ), Tier 1 Supplier
Business segments:
• Engines (2.2L up to 4.67L)
• ISO 9001:2000
• ISO 9001:2001
• ISO 14001
ZMZ
Key Clients:
● Tolyatti
• JSC ”GAZ” (more than 50% of total output)
• JSC ”UAZ”
• JSC ”Pavlov Bus”
Employees: 7,807
Turnover: € 425M
Growth Rate:13.3% pa
Ownership Structure
• ZMZ produces over 80 models of engines.
• In 2007 the first experimental-industrial batch of 4 cylinder gasoline
engines at Euro-3 standard were produced for UAZ and GAZ.
• The level of production defects in 2007 were very high at 1,201 РРМ.
• In 2007 ZMZ invested €7.6M in 8 projects that focused on Euro- 3 petrol
and diesel engine development.
• Since 2005 ZMZ have implemented the Toyota Production System to
improve their production process including Kanban system.
Others, 7.57%
Lindsell Ent Ltd.,
4.67%
Severstal Auto, 87.76%
Market position
Spare parts production in Russia in 2007
JSC “ZMZ” Capacities: 2007
Production
251,741 engines
Capacity
375,000 engines
OJSC "Zavolzhsky Engine Plant“ (ZMZ) , Tier 1 Supplier
• R&D personnel includes 10 people (60% with excellent 3D skills). Company has
its own design and test facilities.
• 5 years ago had unsuccessful project with Russian company focused on new
engine development. It was found that there was no market demand for the
development.
• In 2008 ZMZ plans to upgrade their engines and a arrive at pre-production stage
for petrol and diesel Euro-4 engines for GAZ and UAZ.
Interest in
Collaboration
-
+
Other
Figures:
D&E Budget:
Outsource D&E:
€1,89 mln
Not Available
• ZMZ’s focus is to concentrate on their three key clients (GAZ, UAZ and Pavlov
Bus) and shape their product line based on their requirements.
Image source: www.zmz.ru
DEG members:
• Internal combustion engine
• Engine systems
• ZMZ have vehicle assembly and production space to sell
Frost & Sullivan expects that the most interest for collaboration with DEG members is
surrounding Euro-4 engine development and testing
OJSC "Ural Automobile Plant“, OEM
Business segments:
•
•
•
•
•
ISO 9001:1994/EN 29001
ISO 9001:1996
ISO 9001:2000
Trucks
Chassis
Special equipment
Special and cargo buses
Spare parts and diversify products
Ural (GAZ)
● Miass
Key Clients:
• TD URAL-avto
• Ministry of Defense of the
Russian Federation
Ministry of
Defense, 20.0
%
South-Eastern
Asia and Africa,
CIS counties,
5.5%
4.3%
Employees:12,892 (2007)
Net income :€10,4 mln (2006)
Ownership Structure
Foreign Markets:
• CIS counties
• South-Eastern Asia and Africa
Russian market, 70.1%
OJSC “Gaz Group” 100%
• "Ural Automobile Plant" JSC belongs to GAZ Group and is the major
enterprise in "Heavy vehicles" division.
• Ural started road car production in 2006.
Market Position
The share of Ural in competitors in the total production
• Partnership: DÜRR (industry engineering), Camano, Magna Int, Edak.
• Toyota Production System has been implemented to reduce production
cost.
Maz, 0.02%
Ural, 54.90%
• Ural plans to increase production of natural gas engines rather than
petrol.
Kraz, 3.85%
Kamaz, 41.30%
OJSC "Ural Automobile Plant”, OEM
• Ural’s R&D department has only one year of experience. They do
outsource some of their Design and Engineering however would
not state further details during interview.
Interest in
Collaboration
-
Other
• In 2008, company is focused on the following areas:
• Product development (expansion of the existing product lines),
• Euro 4 certification
• Modernisation of the existing production facilities and
equipment
Figures:
D&E Budget in 2006: €0,81M
Outsource D&E:
Not Available
• Cabin comfort improvement
• Development and implementation of the new generation full
power commercial vehicles on the base of the road vehicles
aggregates and axles
Image source:
www.uralaz.ru
DEG members:
•Truck development
•Truck cabin planning, development and engineering
•Car and chassis development with Euro-3, Euro-4 engines
•Mastering chassis production of the large and middle class buses
•Increase durability of vehicles and their components
Frost & Sullivan expects that the most perspective area for collaboration with DEG members is
truck cabin planning, development and engineering
+
OJSC “AMO ZIL”, OEM
Business segments:
• Light, medium and heavy-duty trucks in
4x2, 4x4, 6x4 and 6x6 wheel arrangement
• Buses, specialized vehicle, passenger cars
• Auto aggregates, spare parts
ZIL
 Moscow
Key Clients:
On the external market AMO ZIL supplies products through
company-commissioner Ltd. "FTF ZIL AMO ZIL-export“
100% of vehicle and 99% of components export in CIS countries
• In 2009 a planned Joint Venture between AMO ZIL (51%) and the
Japanese company IHI (49%) will deliver metal parts (doors and bonnets)
for Renault’s Russian Dacia Logan production.
Employees in 2008: 7,936
Turnover in 2006: €148,6
mln
Ownership Structure
Others, 35.62%
• All production of ZIL meets Euro 2 standards, however between 2008 and
2010 ZIL will transfer to Euro-3 engine production.
• ZIL develop all components in house except engines.
Joint Stock Commercial Bank
"Bank of Moscow“, 64.38%
Market Position
JSC “ZIL” Capacities: 2007
Production
9323 trucks, 26 buses
OJSC “AMO ZIL”, OEM
• ZIL’s R&D facilities includes only 2 persons which is viewed as more than
enough. There is a lack of investment into R&D.
• ZIL have a poor impression of foreign D&G companies and the trend would
be that if they were to outsource, they would work with Russian
companies.
• In 2008 ZIL plans an exterior modernization of traditional mass-produced
cars. They will also improve reliability levels and environmental safety (to
Euro 3 and Euro 4). Testing certification shall be mandatory and there will
be development of the new vehicle modes with load capacity 4.5 tons ZIL4362SO and new family cab over engine ZIL cars.
• Possible growth areas are in implementing disc brake mechanisms with a
pneumatic brakes system and car production with new outlook and
technical characteristics.
• Modernisation of transmission units, gearboxes and leading bridges is also
a priority.
DEG members:
Interest in
Collaboration
-
+
Other
Figures:
D&E Budget:
Outsource D&E:
NA
NA
Image source: www.amo-zil.ru
Not interested in collaboration
None of their design and engineering is outsourced
Frost & Sullivan states that ZIL is not interested in outsourcing*
* Following an information from the interview with main designer
OJSC “AZIA AVTO”, OEM
Business segments:
• Car assembly (Lada -2 models, Skoda 2
models, Chevrolet-3 models)
• Automotive components: decorative
arch, strings of electric wires, tuning
• Automotive component assembly
ISO 9001: 2000
Azia Avto
KAZ
Ust-Kamenogotsk●
• Azia Auto is purely an assembly plant, and plans to reach full capacity
production cycle in 2-3 years and produce 35 thousand vehicles a year.
• Azia Avto cooperates with Avtovaz, Skoda, General Motors, and Deo
Automotive Technologies.
• Asia Avto does not have R&D and uses existing solutions.
• AvtoVAZ-RENAULT-NISSAN intends to purchase 25% +1 of shares of
Image source: www.aziaavto.kz
Asia Auto to increase production capacity from 800 thousand to 1.5 million
cars per year.
Azia Avto Capacities: 2007
Production
6,311 cars (Euro-2)
At the moment, Azia Avto is involved only in the vehicle
assembly
Interest in
Collaboration
-
+
Product Test & Manuf.
Other
ZAO "Zaporizhzhia Automobile Building Plant “ (ZAZ), OEM
Business segments:
•
•
•
•
•
•
Press production
Body welding
Painting
Engine production
Assembly, final assembly
Tests and logistics
ZAZ
UKR
Zaporozhie ●
• ZAZ is the only company in the Ukraine that possesses the full skill set
of passenger cars manufacturing.
Employees:16,000
Ownership Structure
• ZAZ cooperates with General Motors Daewoo Auto & Technology, Adam
Opel, DaimlerChrysler, Automobile Daces S.A, FSO, ТАТА and
AvtoVAZ.
• Since 2005 "ZAZ" has been exporting its products to Russia Federation.
• In 2008 ZAZ plans to produce 77 000 Chevrolet Lanos for Russia.
CJSC ”ZAZ” Capacities: 2007
Production
282 310 cars
ZAZ belongs to Ukravto Corporation
Market Position
JSC 'ZAZ's share of the Ukrainian car
production market amounted to 67.2
percent in 2006
ZAO "Zaporizhzhia Automobile Building Plant “, OEM
• In-house R&D facility includes 25 people.
• Last new model was developed in the 1990’s (Slavuta).
Interest in
Collaboration
-
+
Other
• ZAZ performs important test and validation work (including crash
tests, toxicity) in Russia and Poland.
• Testing is based on analogy lines on which General Motors tests its
Figures:
D&E Budget:
Outsource D&E:
NA
NA
cars.
• In assembly, ZAZ uses high-tech conveyor systems that allow lump
assembly of several cars model and modifications.
Image source: www.zaz.ua
DEG members:
•
•
No present requirements but open to discuss potential areas
that can provide cost savings and increase their profitability.
If companies have ideas that will be profitable will be open to
discuss.
Frost & Sullivan states that Zaporizhzhia Automobile Plant is open to cooperate in profitable
projects
Minsk Automobile Plant (MAZ), OEM
Business segments:
•
•
•
•
Trucks
Passenger vehicles
Towed vehicles
Special purpose vehicles
ISO 9001:2001
MAZ
BEL
Minsk 
Key Regions:
• CIS countries-90%, Turkmenistan, Poland, Serbia,
Vietnam, Latin America
• Company’s target for next decade is annual production of 50,000
Employees in 2008:
Turnover for first 6 months
in 2007: €820 mln
Production Growth
Rate:15%pa
Ownership Structure
trucks and 2- 3,000 buses per year.
• MAZ is planning to build new bus factory which will be able to produce
3,000 buses annually.
• MAZ heavy vehicles cars meet Euro-2, Euro-3 and Euro-4 standards.
State of Belarus 100%
Market Position
MAZ Capacities: 2007
Production
25,000 vehicles
Sales
Can sell 35,000
No financial data is available (neither
from secondary sources, nor from
primary interviews)
Minsk Automobile Plant (MAZ), OEM
• MAZ has own R&D department which develops cabins, chassis,
car bodies, designs.
Interest in
Collaboration
-
+
Other
• Minsk Motor Factory has developed a new generation of EURO-4
engines (production start in 2009) using Bosch technology.
• Exchange of experience (system integration, production and
strategic organization) with Deutz, Knorr Bremse, Bosch, Wabco
Figures:
D&E Budget:
Outsource D&E:
NA
NA
to improve solutions and increase efficiency.
• Joint venture MAZ-MAN established in 1997.
• Not interested at present moment. Will contact in the future. Now
have to speak with General Director.
Image source: www.maz.ru
DEG members:
• Not interested at the current moment
• D&E proposal will be reviewed
Frost & Sullivan expects that more information will be available after an interview with General
Director
OSJC AVTODIZEL “Yaroslavl Motor Plant” (YaMZ), Supplier
Business segments:
• Diesel engines
• Car coupling, gearboxes and spare parts
• Aggregates
ISO 9001:2000
YMZ
Key Clients:
Russia:“ “Ural “, "Rostselmash“, "Krasnoyarsk plant
harvesters", JSC "Chelyabinskie construction machinery",
"Bryansky arsenal", "Promtractor" Ltd. "Likinsky Bus“
Foreign:"MAZ", "Gomselmash", "Minsk plant
wheeled tractors“, "AvtoKraz", "Kharkiv Tractor Plant"
●Yaroslavl
Employees in 2005: 16,974
Turnover in 2008: € 144mln
Production Square: 645182
м2
• In 2007 "Avtodizel“ moved to the Euro-3 engines production.
Ownership Structure
• All YaMZ products are Euro-1 and Euro-2 standards.
Others, 3.7%
• In 2007 "Avtodizel" launched in a new production a heavy-cylinder engine YaMZ-
The Federal Agency
of Federal Property
Management, 41.3%
650 on "Renault Trucks” license.
• "Avtodizel" (YaMZ) GAZ Group is working with the Austrian engineering company
JSC”Gaz”, 55.00%,
AVL List GmbH on new family row engines YaMZ-530 establishing.
• In February 2008 Avtodizel started the first Russian Euro-4 cylinder engine YaMZ-
Market Position
Avtodizel market share in 2007
534 testing.
MMZ, 18%
YMZ Capacities: 2007
Production
77610
engines,
gearboxes
Others, 4,7%
Avtodizel,
43,3%
30753
Kamaz Dizel, 34%
OJSC AVTODIZEL “Yaroslavl Motor Plant” (YaMZ), Supplier
• "Avtodiesel" includes engineering center with advanced research
Interest in
Collaboration
-
+
Other
and experimental base.
• Investment costs in 2005 amounted to €10,2 million, 56,8%innovative costs, 18,3% in R&D (new family YaMZ-530 engine).
• Focus area in 2008 is on:
Figures:
D&E Budget:
Outsource D&E:
NA
NA
• Development of the Euro-3 engines V6, V8 power range from
230-420 hp with gearboxes.
YaMZ-534
• Electric power installations and new family of engines to power
range of 100-300 hp with gearboxes development.
• Euro-3 engines and YMZ 530 engine production organising.
DEG members:
Image source: www. avtodizel.gaz.ru
• Euro-3 engine development
Frost & Sullivan expects that more information will be available after an interview with
Development Director
OJSC ”UAZ”, OEM
Business segments:
• SUV: UAZ Hunter, Simbir, Patriot
• LCV: UAZ-2206, UAZ-3962
• MPV: UAZ-3303(6), UAZ-3741
GОSТ RВ 15.002-2003
ISO 9001:2001
ISO 9001:2000
UAZ
Key Regions:
●Ylyanovsk
More than 90% of export were delivered in CIS
countries (mainly in Kazakhstan, Belarus and
Ukraine)
Employees in 2007: 11 808
Net profit in 2007: € 36,3 mln
Growth Production Rate:
13%
Ownership Structure
• Company aims to be the leader in producing and selling reliable light
duty cross-country vehicles in CIS countries.
Other Shareholders,
34.00%
• In 2006 Stadco optimised stamping processes at UAZ to improve the
quality of the bodywork.
;
Severstal Auto,
66.00%
• Stadco undertakes small-scale production of stamping on UAZ.
Market Position
SUV sales on Russian market in 2007
OJSC “UAZ” Capacities: 2007
Production
72 163 cars
Sales
70 825 cars
UAZ, 5%
Second hand
imported cars,
26.00%
VAZ, 5.5%
Imported cars,
63.50%
OJSC “UAZ”, OEM
• The budget for investment projects in 2008 is € 18,91 mln (in 2007:
€ 12,48 mln).
Interest in
Collaboration
-
+
Other
• In 2008 “UAZ” plans Euro-3 & Euro-4 production on their existing
line up of passenger cars and freight series.
• In 2008 UAZ intends to develop experimental R&D facilities.
• R&D work on the relevant norms of Euro-4 UAZ-Patriot 2010 M.G.
Figures:
D&E Budget:
Outsource D&E:
NA
NA
• Organizing Pikap and Hunter Euro-4 production with a diesel
engine ZMZ-5143 with a system of "Common Rail“.
• Organizing UAZ Hunter with ZMZ 409 Euro-4 engine production.
Image source: www.uaz.ru
DEG members:
• Interior and exterior modernization of Patriot 2009
MG
Frost & Sullivan expects that the most perspective area for cooperation with DEG members is
interior and exterior modernization
OJSC “GAZ”, OEM
Business segments:
Location and Performance*
•
•
•
•
ISO 9001:2000
Passenger Cars (GAZ)
LCV (GAZ, LDV)
MCV & HCV (URAL)
Buses & Special vehicles
(PAZ, LiAZ, GolAZ, KAVZ, KAAZ and others)
• Powertrain (YaMZ, UMZ, Nizhegorodskie
Motori, YaZDA)
GAZ**
● Nizhiy Novgorod
Key Regions:
• Russia remain key market for the products of the GAZ group
Employees: 110,700
Turnover: €3,283M*
• GAZ produces a variety of minibuses, buses, LCVs and trucks with 4x2
and 4x4 wheel arrangement (EURO-2).
• GAZ is one of the largest holding groups in Russia and CIS countries.
* Note: Data is provided for all GAZ Group for 2006
** Indicated location of Zavod GAZ
Ownership Structure
• Company is expected to continue strengthening of the core activities
while automotive components division to be transferred to RM Systems.
• In order to improve its market position, GAZ actively cooperates with
foreign companies (Magna Int) and acquired LDV (UK).
• In passenger car sector, GAZ rolled out production of Volga Sibir design
of which was developed jointly with UltraMotive (UK).
•
Aim of the GAZ Group is to expand its presence in the international
markets, Western Europe in particular by obtaining new technologies and
entering into alliances with foreign automotive corporations.
• GAZ continues restructuring and modernization of the facilities and
equipment.
Market Position
GAZ is Russia's biggest manufacturer of LCVs,
Trucks, and Minibuses (market shares in Russian
Federation 2006: LCVs 45.7%, light trucks (<3.8t)
50.4%, medium trucks (<10t) 58.2%, AWD heavy
trucks 57%, 6x4 heavy trucks 5%)
OJSC “GAZ”, OEM
• According to GAZ plans to invest $1 billion in R&D during the next 5
years, however the precise plan is not disclosed.
• GAZ is focused on the upgrade of up to 90% of the product line in the next 5
years.
• Company cooperates with number international companiesEdek
Engineering, Plus Design AG, AVM, Goepel, General Service, IDIADE
(Spain), UltraMotive and others.
• Through large scale investments, GAZ aims to develop own
design, manufacturing and technological competencies in Russia through creation
of the Unified Engineering Centre.
Interest in
Collaboration
-
+
Other
Figures:
D&E Budget:
Outsource D&E:
Est €20.8M
Est €10M
• Growing sales of the GAZ group allows company to devote increasing financing to
D&E including outsourced D&E services.
• GAZ has experience in cooperation with foreign D&E companies however due to
further intensification of the collaboration with Magna International some
outsourced projects were suspended (ex. Ricardo).
Image source: www.sostav.ru
DEG members:
•
•
•
•
•
•
Concept design
Active and passive safety systems
Security systems
Development of 4x4 LCV platform
Various systems engineering (electrics, braking systems, exhaust
systems, engines, steering systems and others)
Testing and validation (components level, vehicle level and comfort)
GAZ group is one the most attractive players in Russia and CIS with significant opportunities for
the DEG group
OJSC “KAMAZ Inc”, OEM
Business segments:
ISO 9001:2000
• MCV & HCV
ISO 9001:2001
• Buses and special vehicles
(Nefaz, Tumaziyskiy Zavod Avtobetonovozov)
• Diesel engines (Kamaz-Diesel)
KAMAZ
Export
26%
Key Regions:
• Russia is key market for KAMAZ
• Export to CIS, Asia, Africa and South America
● Naberezhnie Chelny
Russia
74%
• KAMAZ Group of Companies is leading Russian heavy truck
manufacturer. It produces a wide range of trucks (over 30 models, more
than 400 kits, right-hand vehicles), trailers, buses, tractors, engines,
power units and different tools.
• KAMAZ is expected to expand production capacities for CV to reach
85,000 units a year by 2010
• Company collaborates with the number of the foreign suppliers such as
«ZF», «Bosch», «Gummins», «Deutz», «Schwitzer», «Knorrbremse»,
«Wabco», «GWB», «RBL»
Employees: 16,134
Turnover: €1,609M
Ownership Structure
Others, 6.8%
Vneshtorgbank,
11.5%
Rosimuschestvo,
37.8%
OJSC "KAMAZ Inc.“ Capacities: 2007
Production
65,000 trucks
Sales
52,700 trucks
Market Position*
Kamaz,
34.3%
53,000 trucks
Capacity
ZAO DDK, 43.9%
Others,
65.7%
*Note: Trucks GVW 14-40 t
OJSC “KAMAZ Inc.”, OEM
• KAMAZ is actively involved into modernization of the existing product line
and development of the new products to support market growth of the
company
• KAMAZ has its own D&E center employing 900 people
Interest in
Collaboration
-
+
Other
• Company needs to adapt to upcoming EURO 4-5 requirements
• KAMAZ acquired number of CAD/CAE solutions in the past 4 years,
however lacks the experience in the efficient and full scope use of the
products. Company requires support in the virtual testing and validation
(currently testing is based on the road testing)
Figures:
D&E Budget:
Outsource D&E:
Est €8M
• Contract was signed with Ricardo for euro 4/5 engines development and
with n/a company for new cabin development. Hybrid engine
development is one of new projects
• KAMAZ collaborates with German and Korean companies in D&E
• In Scientific Technical Centre are employed 900 specialists
• KAMAZ Inc. is very interested in collaboration with DEG members
and is looking for the opportunities for cooperation
DEG members:
•
•
•
•
•
•
Image source: www.kamaz.net
Cabin interior and exterior design
New vehicles design for MCV and HCV, modernization of existing product range
Product engineering of engines and systems, quality improvement
Testing and validation for EURO 4-5
Hybrid engine development for Kamaz chassis (bus and city car)
Support in CAD/CAE implementation
KAMAZ is one the most attractive players in Russia and CIS with significant opportunities for the
DEG group
Holding company "AvtoKrAZ“, OEM
Business segments:
• MCV and HCV
• Military trucks
ISO 9001:2000
AvtoKrAZ
UKR
Key Regions:
• Russia is the key market for the
company
Kremenchug ●
• Leading Ukrainian manufacturer and supplier of heavy-duty trucks and
special-purpose vehicles (10 do 30 ton).
• Company plans to increase production of the CV by more than 20 per
cent to exceed 5,000 unit mark.
Employees: 6,800
Turnover: €121M (2005)
Growth Rate: Not Available
Ownership Structure
Not available
• Major partners of AvtoKrAZ are YaMZ, Cummins, Deutz, Volvo, Knorr
Bremse and Schmidt.
• AvtoKrAZ is expected to expand its operation outside of Ukraine by
establishing assembly lines in Cuba and India.
Market Position
“AvtoKraz” Capacities: 2007
Production
4,206
Capacity
Est. 10,000
4,100
Sales
AvtoKrAZ is the largest
Ukrainian manufacturer of the
heavy commercial vehicles
Holding company "AvtoKrAZ“, OEM
• AvtoKrAZ develops most of the components and systems in-house
(chassis, transmission, axles etc).
• Design and Engineering is done at AvtoKrAZ at the Engineering
centre.
• Company does not outsource D&E service, however would be willing
to discuss areas for potential collaboration due to current
engagement of AvtoKrAZ in development of the new truck (cab over
engine).
Interest in
Collaboration
-
+
Other
Figures:
D&E Budget:
Outsource D&E:
NA
NA
• From 2008 plan, AvtoKrAZ plans to roll out production of this new
truck with EURO 3 engine.
• Company plans to complete face-lifting for the existing models as
well as to make cardinal cabin changes (new instrumental clusters
and dashboards, seats etc).
Image source: AvtoKrAZ
DEG members:
• Design of the new vehicles
• Cabin design
• Engineering of the key systems
Though AvtoKraz is not explicit about strong interest in outsourced D&E services, DEG members
could propose existing solutions in cab design and systems engineering
NAMI (State Research Center of the Russian Federation)
Scope of Services:
• Automotive industry market measurements and research.
NAMI
• Design & Engineering services.
• Creating, testing and refinement of promising samples of
automotive technology.
●Moscow
• Applied research for industry plants and related industries.
Project Completed:
• Electric power plants with combined electric generator based on fuel cells
"hydrogen - the air" on the chassis ZIL-5301.
• Prototype car type VAZ-21130 for drivers with disabilities.
• Samples of ATS ambulance based on “Gazelle" chassis.
• Samples of ATS ambulance based on "Sable“ 4x4 car.
• Modification and redesign of “small sized commercial vehicles”.
• Development of the school bus based on GAZ-33104 "Valdai“.
• Adaptation of the automatic transmission to locally produced cars.
• State-owned NAMI is actively involved into development of “ Concept of
Automotive Industry Development in Russia“.
• Automotive D&E department includes 28 people.
• Provides regulation of the Russian automotive industry in respect to
standardization and certification of D&E activities of OEMs and
suppliers in Russia.
• NAMI was granted €7.5M in 2001 for the development of the new
generation diesel engine.
Image source: NAMI
OOO “Autodesign”, D&E Service Provider
Business segments:
• Design & Engineering
• Development and production of:
• Auto components
• Special vehicles
• Body and Van
Autodesign
ISO 9001:2000
ISO 9001:2001
● Naberezhnie Chelny
Employees: 120
Turnover: €0,9M
Growth Rate: NA
Scope of Services:
•
•
•
•
•
Project development
Automotive components development
Manufacture of small and medium series
Prototypes manufacturing
Certification
Projects Completed:
• ZIL: Restyling projects of cabins ZIL-4368 and 4331 (2003).
• KAMAZ: Design and components production of KAMAZ-4308 exterior
(2003,2006).
• GAZ: restyling project for GAZ 3110 (2001).
• A series of restyling projects of serial model GAZ 3110 (2001).
• Project for off-road vehicles design.
• Autodesign works in the field of automobile manufacturing and
automotive technology since 1990.
• Total production for 12 years: more than 15 thousand cabins.
Image source: www.sostav.ru
Technologies:
• CAD / CAM modelling (Icem Surf, SolidEdge)
• The vacuum-forming of large parts
• RIM-casting polyurethanes in the enclosed form (Tartler
MDM 6)
• Measurements using Baces 3D coordinate machines
• Rapid prototyping at the Dimension SST 768
OOO "Avtoprostor“, D&E Service Provider
Scope of Services:
• Development of style and layout of vehicles.
Avtoprostor
● Vladimir
• Engineering of ergonomic interior solutions.
• Strength calculations.
• Design and production of metal structures and assembly.
• Prototyping and manufacturing engineering.
• Preparation for mass production.
Employees: NA
Turnover: NA
Growth Rate: NA
Ownership Structure
Not Available
• Avtoprostor was involved into several large project with
Russian OEMs such as GAZ group.
• Company provided product engineering services to the
Belarusian tractor manufacturer BelAZ.
• Detailed scope of the services and annual turnover is not
available.
Market Position
Not Available
7. Strategic Conclusions and Recommendations
100
DEG Member Should Consider Active Search for Collaboration with
Russian and CIS Companies
•
Passenger Car
OEMs
•
•
Commercial
Vehicle OEMs
•
•
Tier 1 & 2
Suppliers
•
•
•
Proactive
business
development
Primary focus should be given to offering
solution in exterior and interior design, facelifting and new models design.
Modernisation of the existing vehicles is
required.
Existing expertise of the DEG members in
cabin exterior and interior design is required by
the local OEMs.
Modernisation of the existing vehicles in
required.
Product engineering has strongest demand
from all the tier 1 & 2 suppliers.
Expertise in low cost components engineering
is required.
Local companies need support in
modernisation of the production processes
Support in implementation of the D&E
software.
Complex
solution
Ability to
show
expertise and
technological
superiority
Adaptation to
the local
business
environment
Success Factors
• While Russian and CIS OEMs and Tier 1&2 suppliers search for the solutions in the all design
and engineering areas, SMMT/DEG members should start planning visits to local companies.
101
Location of Organisations Willing to Cooperate with SMMT DEG
Scale used for willingness to co-operate
0= No Interest, 4 = High Interest
Avtopribor = 3
NAAZ =1
Executive Summary
ZIL = 0
RUSSIA
GAZ = 3
AvtoKOM = 4
UMZ = 3
YaMZ = 2
UAZ = 2
MAZ = 2
KAMAZ = 4
● Ulyanovsk
● Vladimir
SAAZ = 4
KZAE = 1
● Miass
● Naberezhnyje Chelny
 Moscow
Minsk 
BEL
Ural (GAZ) = 3
● Tolyatti
● Skopin
Asia Auto = 1
UKR
●Kremenchu
g
● Zaporozhie
KAZ
UZB
AvtoKraz = 1
ZAZ = 2
AvtoVAZ Aggregat = 3.5
ZMZ = 3
102
APPENDIX
•
Overview of the Russian Automotive Market
Slide 104
•
PESTLE Analysis
Slide 110
103
Total Capacity Growth in Russia: Production Capacity will Increase
to Support Market Sales
15.0%
12.0%
2,500
9.7%
Capacity, thousand
units
Russian and CIS Markets Overview
3,000
10.0%
9.6%
2,000
5.1%
5.0%
3.4%
3.0%
1,500
1.6%
0.0%
0.0%
1,000
-5.0%
500
-7.5%
0
-10.0%
2004
2005
f2006
f2007
f2008
f2009
f2010
f2011
f2012
Total Capacity
Growth Rate
Note: Based on 2006 market estimations
AvtoVAZ decreased
their production
capacity
Toyota and Great Wall would
reach their max. production
capacities
104
Current and Projected Capacity Utilization by OEM in Russia:
Average Capacity Utilization is expected to increase by 25.1%
Average capacity utilization, 2012
90
80
70
60
59.7%
50
+ 25.1 %
40
34.6%
30
20
10
ov
az
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er
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en
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os
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G
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at
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oV
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G
AZ
G
Fo
rd
or
ot
os
Av
t
fr a
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Av
to
ok
om
0
Au
t
Russian and CIS Markets Overview
Average capacity utilization, 2005
100
2012
• Low current capacity utilization of production facilities by manufacturers in Russia will be raised up 25.1%
due to entry of new OEM’s and increasing demand for vehicles (including produced domestically).
105
Overview of Russian and CIS Automotive Market
Domination of the Russian OEMs Comes to the
End
• Russian automotive players have reached a situation when increasing prices
for raw materials as well as auto components diminishes their exclusive
competitive advantage such as low prices.
• Wider introduction in the CIS market of foreign vehicles with comparable
pricing to local models (Daewoo Lanos, Renault Logan, Hyundai Accent
among others) and creation of joint-ventures (which assembly foreign low
priced brands) change the customers’ attitude toward passenger cars.
• With increasing demand for passenger vehicles, more importance is given to
the quality of a vehicle and post-sale services.
• Domestic manufacturers experience structural problems, but not cyclical as
at may seem, due to high wear of equipment, assembly quality, human
resources and brand perception.
• Diminishing sales and profit margins force Russian OEM’s to look for strategic
partnership with foreign manufacturers in order to revitalise their
production, gain technological insights and survive on the market.
Domination of the Russian OEM‟s products on the territory of the
former USSR is still significant. However such domination would
fall apart as soon as other OEM‟s would establish good
distribution networks for vehicles and auto components.
Features
 Decreasing number of the
Russian models
produced.
 Steadily decreasing
market share.
 Technological stagnation.
 Unsuccessful strive to
improve quality.
 State protection of
several domestic
manufacturers.
 Well-developed
distribution system.
 Low financial and
operational transparency.
 No experience of working
under global competition.
 Domination on the
markets of former USSR
for both new and used
vehicles.
106
Prevailing Ownership Structures (Russia), 2006
Direct Investments
100 % Greenfield
Greenfield
Regions with Particular
Investment Conditions
Existing Facilities
Brownfield
Special Economic Zones
Joint Venture
Prevailing Ownership Structures of Foreign Producers in Russia
JV with Auto Manufacturer
FORD Motor Russia successfully launched their
own production facility and assembly line for Ford
Focus near St. Petersburg.
Based in Kaliningrad, Avtotor benefits from special
economic conditions applied to enterprise working
in this particular region.
Avtoframos together with Renault produces Renault
Logan on the facilities of “Moskvich” manufacturer
that went bankrupt earlier.
Severstal Auto initiates assembly of FIAT vehicles
in Alabuga, region which has being given a status of
Special Economic Zone.
The first JV in Russian Automotive industry was
established in 2002 between GM and AvtoVAZ.
JV with Components Manufacturer
Another option to be considered by new entrants is
establishing JV with either their global or local
supplier.
Local Distributors & Dealers
One of the largest independent distributors of
passenger vehicles “IRITO” organizes assembly of
BYD Flyer in the Moscow Region.
107
Quote
What the OEM‟s say about opportunities in Russia
"Customer demand for non-Russian brands is growing at a rate which exceeds our
projections. It is also clear that customers choose brand taking into consideration the
"Total Cost Equation": it is no longer a low purchase price that is important for them but
residual value, running and repair costs, plus quality and value that now decide which
brand to choose…”
One of the Foreign OEM‟s Representative in Russia
108
Potential of Hybrid Cars Sales in Russia: Future is not that Green
• No tax incentives to spur the interest of
• First hybrid vehicle, which appeared in
Russian in buying hybrid vehicles.
Russia was Lexus RX400h.
• Absence of required infrastructure
• Imported unofficially, Toyota Prius also
(service stations) and technical
appears on the Russian market, however in
knowledge.
very limited quantities.
• Majority of Russians are not able to
• While sales of RX400h reached 268
afford buying hybrid vehicle due to high
vehicles for the year 2007, representative
price.
office of Toyota Motor admitted that:
• Despite presence of prototypes
developed by Russian OEMs
“ Russians are not ready yet for
(AvtoVAZ), local companies focused on
perception of hybrid vehicles”
facilitation of sales in traditional
segments.
109
PESTLE Analysis: Introduction
• Development of the Russian
economy drives the growth across
all industries including automotive
sector.
POLITICAL
ENVIRONMENTAL
• Automotive industry in Russia is
on the top list of priorities for the
development for the current
Government of the Russian
Federation.
• Russian automotive industry
should be considered within nexus
of internal and external factors.
ECONOMIC
Russian
Automotive
Industry
SOCIAL
• Currently, Russia is the state
where the political and economic
priorities are setup for the next 1015 years thus it determines the
scenarios for automotive industry
development and attractiveness
for foreign investors.
LEGAL
TECHNOLOGICAL
110
Importance of the Russian Automotive Industry
Russian Automotive Industry is Important Part of Russian Economy
and has Strong Supported from the Government
Raw Materials
35%
Components
20%
40%
40%
25%
35%
Assembly
45%
35%
25%
Value Added
4 per cent of
GDP of the
Russian
Federation
Employment
Tax Collection
6 per cent out of
total number
employed
3 per cent of
taxes collected
by the
government
Russian Economy
Russian Government is the largest shareholder of the biggest Russian automotive
manufacturers and considers automotive industry as one of the key national interest points.
111
Political Environment – Main Questions
Will political course remain
unchanged?
• Political stability of the Russian Federation in next 10-15 years
is one of the key questions, which bothers all industry players.
Will be there any other
„Yukos‟ cases?
• Government of Russia have to show the willingness to provide
foreign capital with reassurance that political forces and
interests will not impede development of automotive market.
For how long favorable
investment conditions
would remain?
• Existing preferences for creation of automotive production
(assembly) lines would remain until accession of the Russian
Federation to WTO (already in 2008?).
Would Government protect
domestic players?
• Changes in political balance might force investors to flee the
Russian market as those changes might provoke protective
measures for domestic auto and components manufacturers.
112
Political Environment – Development Scenarios
Existing political environment could develop under 3 main scenarios:
Scenario
• “Edinaya Rossiya” party will keep following publicly
announces strategy of economic development of the
country.
Stable Future
• Prioritized areas of economic development (including
automotive sector) will remain unchanged.
Best
• Further improvements of regional support to OEMs.
• Certain inclinations toward remnants of centralised
economy will persist.
Centralization
• Government will keep pursuing nationalisation of main
industries.
Acceptable
• Strong dependence of economic agents on State
decisions.
• Ruling political party will change and Russian parliament
will have no majority (but non-permanent unions during
elections).
Back to 90‟s
• Previously made decisions will be revised, modified or
canceled.
Bad
• Legislature chaos will come back.
113
Russian Government‟s Vision on Development of the Russian
Automotive Industry
“Our vision of the further development of automotive industry
(meaning: Russian) is in cooperation with large foreign
manufacturers. They are also investors. And create jointly with
them assembly and production lines of auto components”
Deputy Director
Ministry of Economic Development and Trade
114
Macroeconomic Overview: Russian Economy has Positive Growth
Prospects
Actual
35000
Forecast
16%
15.1%
14%
12.0%
11.7%
25000
12%
10.9%
GDP growth rates
Inflation rates
20000
9.0%
8.5%
10%
8.2%
7.2%
7.3%
6.4%
15000
8%
6.0%
5.5%
4.7%
5.3%
6%
10000
4%
5000
2%
0
0%
2002
2003
2005
2006
2007
Actual
32.00
Exchange Rate, rubbles per $1 dollar
2004
2008
Growth Rate, %
GDP, billion rubbles
30000
• Although high oil prices and a
relatively cheap Ruble are
important drivers of this economic
rebound, since 2000 investment
and consumer-driven demand
have played a noticeably
increasing role.
• Real GDP growth in the Russian
Federation of 4.0-to-5.0 percent is
assumed for the medium term
(2012), falling towards three per
cent in the longer term (2025).
Forecast
• Economic downturn of US
economy as well as high oil prices
on the international market drove
the average exchange rates of
US$/RUR is expected to reach
the lowest level since 2000.
31.00
30.00
29.00
28.00
27.00
26.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
• Nevertheless, the increasing trend
in US$/RUR exchange for up 2009
has negative impact on the
Russian automotive market
115
Comparison with Other Emergent Economies: Russia is One of
Growth Poles in the World
India
China
Brazil
Poland
Russia
Ukraine
GDP, $ billion
$719.8
$2,225.0
$619.7
$246.2
$799.0
$75.1
GDP per capita, $
$3,400
$6,800
$8,300
$13,100
$5,571
$7,000
Population, millions
1,095
1,313
188
38
143
46
Growth Rate
8.4%
10.2%
2.3%
3.4%
6.4%
2.6%
6.9%
2.2%
10.9%
13.5%
In comparison to “Big Boom” countries, Russian
are one of the 1.8%
highest in
Annual economy
Inflation growth rates4.2%
the group along with constantly growing GDP
per capita, which indicates about possible
growth of consumer incomes
12.0%
China
• Favorable economic conditions in Russia will
spur further economic development of the
country and prosperity of the population of the
Russian Federation.
GDP Growth Rate
10.0%
India
8.0%
Russia
6.0%
Poland
4.0%
Brazil
2.0%
• Annual wage growth of 6.5 per cent facilitates
demand for passenger cars in general and in
low-priced segment in particular.
Ukraine
0.0%
1
10
100
1,000
10,000
Population, million
116
International Trade of Russia: Economic Revival Will Boost Export
of Industrial Products
• For the next 6 years till year 2012, the
change of existing structure of the trade
Main Trade Partners of the Russian Federation in 2005, bil. dollars
balance toward export of industrial
• The structure of the main trade partners
of Russia would remain unchanged
Billions of US dollars
products is expected.
30.0
Trade turnover with China will
26.6
21.8
25.0
increase in the long term
18.8
20.0
15.7
15.0
9.9
9.2
9.0
10.0
9.0
8.8
8.7
5.0
d
SA
la
n
Fi
n
er
la
it z
U
nd
K
U
Sw
Po
la
n
d
y
ke
Tu
r
a
hi
n
C
It a
ly
s
la
nd
et
he
r
m
N
growth 25-30 per cent annually.
G
er
except trade turnover with China, which
an
y
0.0
• Further development of transport corridor “East-West”, which connects Asia-Pacific region with Western
Union, creates addition opportunities for foreign OEMs.
• Russian Automotive Industry occupies on the biggest chunks in the import structure of the Russian Federation.
117
Increasing Car Penetration in Russia is Supported by the Gradually
Increasing Prosperity of the Russian Population
Car Penetration: Cross-Country Perspective,
Cars per 1,000 People
600
500
400
300
200
100
0
Germany
USA
Russia
Ukraine
2005
Brasil
China
India
2010
Besides of the growth of the car
penetration rate per 1000 people
(from 175 currently to 235 in
2010), structural changes in the
automotive market will occur such as
substitution of old Russian
brands, which are not satisfying
EURO2 by new domestic or foreign
brands.
• Increasing difference in average income level of the biggest cities of Russia such as Moscow,
St. Petersburg, Ekaterinburg etc. creates certain social tensions among Russian population
but it has low impact on automotive industry players.
• Despite positive changes in preferences for foreign OEM’s, general demographic situation is
unpleasant:
• Fast aging population.
• Great gap in income distribution across the regions of Russian Federation.
• Small middle class in the total population structure (majority is low income class).
118
Russian Federation: Income Growth Dynamics
100%
90%
2.9
14.3
6.6
11.3
17.7
• Personal income growth is spurred
by general economic growth of the
Russian Federation.
21.6
80%
27.1
70%
32.2
60%
50%
65.5
• Raising prosperity of the Russian
population as well as development of
banking/financial services become
one of the most important factors of
Russian automotive industry growth.
61.9
40%
55.4
30%
46.9
20%
10%
17.3
0%
2002
Below 1,500 RUR
9.9
6.2
3.2
2003
2004
2005
1,500 - 6,000 RUR
6,000 - 12,000 RUR
Above 12,000 RUR
Exchange Rate: 1 USD ~ 27 RUR
18 000
16 000
14 000
RUR
• According to estimations of Ministry of Economic
Development and Trade the average income
would reach 16,686 RUR by 2009.
12 000
10 000
• Given growth estimations are not adjusted for
inflation.
8 000
• Average income level does not consider
unreported (hidden) salaries and monetary
allowances.
2 000
6 000
4 000
0
2005
f2006
f2007
f2008
f2009
119
Technology Development: Russian Government Encourages
Manufacturing of Technologically Oriented Products
• Tightening ecologic restriction (EURO 2 already started in 2006) put under strong
pressure local manufacturers who need to adapt their products to EURO2 standard.
• Development of hydrogen cars and electric cars is seriously limited by absence of
required infrastructure.
• Only possible market for hydrogen cars are the biggest cities of Russia such as Moscow
or St. Petersburg.
• Russian Government exert substantial effort to revitalise technological level of the
Russian Federation by creating various technopark, which aim to develop
IT, telecommunications and automotive sectors among others.
120
Technology & Environment: Introduction of New Tech. Regulations
Creates Additional Opportunities for Foreign OEM‟s
Emission
Introduction
Standard
Date
Production new vehicles as well as import of foreign cars in the
Russian Federation should satisfy new technological
requirements, introduced on 1st of January, 2008.
EURO 2
22nd of April, 2006
Foreign OEM’s should pass existing
certification norms for EURO2
EURO 3
1st January, 2008
Import to the Russian Federation of the following vehicles produced before the
date indicated below is prohibited:
EURO 4
EURO 5
Production year, including
1st January, 2010
Country of
Origin
1st January, 2014
Introduction of emission standards
provide foreign OEM’s with strong
opportunities in capturing market share
of Russian OEM’s and part of market
of used foreign vehicles
Satisfying ecological requirements:
Do no satisfy emission
requirements
EURO2
EURO3
EURO4
EU, gasoline
Before 1996
1997-2000
2001-2004
С 2005
EU, diesel
Before 1996
1997-2001
2002-2004
С 2005
USA
Before 1995
1996-2000
2001-2003
С 2004
Japan
Before 1997
1998-2004
2005-2010
С 2011
Canada
Before 2000
2001-2003
From 2004
-
India
Before 2004
2005-2009
From 2010
-
Malaysia
Before 2002
From 2003
-
-
China
Before 2003
2004-2007
From 2008
-
Korea
Before 2000
2001-2002
2003-2005
From 2006
Ukraine
Before 2005
From 2006
-
-
121
Legal System Development: Russian Government Supports
Establishment of Production Facilities by Foreign Automotive OEM‟s
in Russia
• According to opinions of the Russian automotive market participants, customs regulations of the
Russian Federation create substantial obstacles for both international operations and operational
efficiency.
• From 1st of January, 2006, the additions to customs code has come into force making international
operations with the Russian Federation easier by lowering the number of customs procedures.
• Government of Russia provides substantial legal incentives for international automotive manufacturers
by offering them simplified requirements.
• One of the serious drawbacks of the Russian automotive companies is lack of their transparency which
imposes high uncertainty on the behaviour of those companies both in short and long run.
Though Russian legal system is very complicated, the “political” decision have been made
by Government of the Russian Federation to support establishment of partnerships or 100%
foreign capital production (assembly) facilities both for vehicles and components
manufacturers in Russia
122
Legal System: Decree #166 Creates Attractive Economic Incentives
to Set Up Automotive Business in Russia
Profit Tax
Reforms
Relevant
Tax
Reforms
VAT
Reforms
Asset Tax
Reforms
Relevant
Customs
Duties
Reforms
Decree #166
Concept of
Industrial
Assembly
• Tax benefits provided by local authorities are restricted.
• 10 percent of initial capital investments (in fixed assets)
could be acknowledged as expenses.
• Possibility of crediting input VAT on invoice acceptance.
• Capital construction: Input VAT is offset in the period
when the costs are attained.
• Additions to Tax Code are made to regulate procedures
for costs accruals and payment of assets tax.
• Inventory is not included into the assets tax base.
Tax reforms aim to
improve investment
attractiveness for
foreign partners and
provide warranties of
stability of existing
legislature
Features:
• Minimum annual production
capacity ………………………..
• Operations to be performed…..
Measurements:
• Time for production set-up …...
18 months for existing plant
30 months for constructed plant
24 months: 10% less of components imported
0-5% for exclusive components used in
manufacturing (standard rate – 15%)
• Restrictions on import ………...
• Applicable duty tax ……………
25,000 units
body assembly, welding and painting
 Introduction of Decree #166 creates favorable conditions for the development of the Russian automotive
market.
 Establishment of local production allows local OEM’s cutting down their costs and providing customers
vehicles with lower prices comparing to imported cars.
123
Special Economic Zone “Alabuga”
Russian government introduced
the law, which regulates creation
of Special Economic Zones
(SEZ) on the territory of the
Russian Federations in order to
spur industrial and technological
development.
SEZ “Alabuga”, Republic of Tatarstan
Aim:
Facilitate the development of autocomponents production
Features:
 20,000 sq. meters
 Duty free zone
 Tax preferences
 Development of the full infrastructure, required for manufacturing
 The main goal of passing SEZ law is to support local
manufacturers and, in particular of automotive industry, to
support creation of competitive autocomponents industry
in Russia.
 The main positive impact of SEZ Alabuga operations
would be experience by KAMAZ and UAZ, which are
closely located and have troubles with autocomponents.
 Great Wall agreed with Russian Government to open
assembly in Alabuga and get tax and import preferences
for 10 years time.
Table of comparative tax rate for SEZ “Alabuga” and the rest of
Russia
Tax
Rate
1. Profit Tax
24.00%
For SEZ Residents
20.00%
2. VAT
18.00%
For SEZ Residents
18.00%
3. Assets Tax
2.20%
For SEZ Residents
0%
4. Land Tax
1.50%
For SEZ Residents
0%
5. Transport Tax
For SEZ Residents
Depending on type and power rating of a
vehicle
0%
6. Duties
Depending on the product type
For SEZ Residents
Depending on the product type
7. Uniform Social Tax
For SEZ Residents
26.00%
26.00%
124

FrostSullivan_Outsourced Design and Engineering Market

Transcription

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