Demanding Consumers Push Logistics Improvements in Tough Russian Car Market

MOSCOW -

- www.automotivelogisticsrussia.com

The market may be reeling from its first major decline in vehicle sales for nine years, made worse by government taxes and anti-corruption measures, but logistics executives are still looking to improve their service to consumers, the Automotive Logistics Russia conference in Moscow heard last week.

While sales drops of more than 50% in some segments mean the logistics landscape has changed drastically, the consensus among carmakers, service providers and dealers at the conference was that logistics had become even more vital in safeguarding precious cashflow.

“The issue for us today is no longer the lack of (road transport) fleets or capacity,” said Natalia Petrenko, Vehicle Logistics Director for Ford in Russia. “Our job has actually become more difficult as we have to improve lead times to meet our customers’ expectations.” Added Sergey Sherbinin of major dealer Rolf Retail: “If the car is not available now to a customer, they will simply go to another dealer.” A year ago there was a wait of 12 months for a Nissan Qashqai and six months for a Toyota Corolla, he added.

The sales decline in Russia has been more dramatic than in most global markets, said Louis Yiakoumi, conference chairman. He was reviewing the feedback from delegates at four other regional Automotive Logistics conferences held so far this year - in India, Western Europe, China and South America. The 2009 series continues with a conference in Detroit in September and then India again in December.

Yet the conference saw supply chain and logistics executives from OEMs and Tier suppliers continue to plan for the longer term. Vehicle makers present included AvtoVAZ, Ford, General Motors, MAN, Mazda, Mercedes-Benz, Nissan, Peugeot Citroen, Renault, Toyota and Volkswagen.

Russia’s new car sales to date are down 50% on last year. The industry’s sales of cars and trucks reached 3.6m in 2008, but even the Association of Russian Automaker’s optimistic forecasts predict only 1.9m this year. PriceWaterhouseCooper and VW are gloomier, predicting just 1.4m.

As a consequence local production, which reached 1.3m vehicles in 2008 and had been projected to rise to 3m by 2012, has been significantly cut. And imports have dived. Truck imports have almost disappeared following a nearly tenfold decline, said Vladislav Zaslavskij, president of the Association of Car Importers and Customs Brokers. The association’s forecast is that imports of cars and trucks this year will not exceed 800,000, down from 2.2m last year.

Government action has been an extra drag on the market. Electronic voting by delegates at the conference put government policy, including customs, as the most significant current challenge for logistics in Russia, above issues such as infrastructure or investment.

Zaslavskij noted that duties and taxes had risen to 53% of the purchase price of as new car, from 46% last year. But on top of that, he said that Russian customs was stifled by bureaucracy and hampered by efforts to quell possible corruption.

“Anti-corruption measures have made it difficult for the customs officials to initiate any new measures,” he said. “The managers of the federal customs feel as though they are participants in a reality TV show, as all of their offices and cars are bugged and being recorded.”

However Barbara Koncewicz of Adampol, which provides car transport and storage via Poland as well as within Russia, identified the opportunity to tackle border queues caused by the poor IT used by customs. “I encourage IT and software providers to go to the Russian government with solutions [for customs clearance],” she said, “because it is aware of the problem.”

Despite market conditions, overall investment in the Russian auto industry continues. “We almost took the decision to the freeze the development of our vehicle distribution centre in Chismena [outside Moscow],” said Alexander Zhuralev, chief executive of Major AutoTrans. The company provides full service finished vehicle storage and logistics including customs handling. “But our customers helped it to continue and it will open in a month.”

The deputy governor of the auto manufacturing region of Kaluga, Maxim Akimov, told the conference that only two of the 42 projects and EUR3 billion worth of previously committed investment for the region had been postponed or cancelled so far. “We believe that we have laid down a foundation for future development,” he said. The region has three industrial parks plus new road and rail links to serve plants for VW, PSA Group, Volvo Trucks and Mitsubishi and their suppliers.

The last word on strategy for the market went to Konstantin Skovoroda of Russian Transport Lines. The company is developing a new terminal at Ust-Luga, and hosted a successful networking reception for delegates on a river boat as part of the conference. He said that too many companies in Russia today were trying to read their fortunes “in the coffee grinds”.

Investors should see the promise beyond the current crisis. “Nobody knows exactly when the situation will change,’ he said, “but waiting for something good is more dangerous than making a decision today.”

Notes to Editors:

Pictures:

Pictures of speakers and of the conference are available, with attribution as ‘courtesy of Automotive Logistics magazine’. Please email pressrelations@ultimamedia.com

Organiser:

Automotive Logistics Russia is one of a series of conferences dedicated to the subject held annually in Europe, North America, South America, India and China. www.automotivelogisticsconferences.com

Automotive Logistics magazine www.automotivelogisticsmagazine.com is the only global print publication covering the logistics sector of automotive. It circulates worldwide to senior executives at car-makers, tier one suppliers and service providers. There is a free weekly news service by email/web, with registrations through the website.

Every issue also includes Finished Vehicle Logistics magazine www.fvlmagazine.com, which is unique in its coverage in print of the outbound sector. Both magazines are also available in full online with registrations through their websites.

All these activities are published by Ultima Media Ltd, a provider of information and media in print, online and at events which is dedicated to the global business-to-business automotive sector. www.ultimamedia.com

Contacts:

Louis Yiakoumi, Conference Director: louis.yiakoumi@ultimamedia.com +44(0)208-987-0944

Chris Ludwig, Editor: chris.ludwig@ultimamedia.com +44(0)208-987-0968

Source: Automotive Logistics Russia 2009 conference

Contacts: Louis Yiakoumi, Conference Director: louis.yiakoumi at ultimamedia.com, +44(0)208-987-0944, Chris Ludwig, Editor: chris.ludwig at ultimamedia.com +44(0)208-987-0968