More investment in Russia may offset sanction effects, execs say

Article by Christian Andrei, on October 10, 2014

Western sanctions imposed against Russia may not be advantageous for foreign businesses, but auto executives are still bent on overcoming such dilemma. Several of them say that it would be best if carmakers continue investing in Russia, as the current crisis in the country failed to dampen their hopes of cashing in heavily from this prime growth market.

They have reasons for their continued optimism. For instance, they believe that Russia’s sour relationship with the United States and Europe may sweeten in a few years. They also cite the declining value of the Russian ruble and the possibility of higher Russian import tariffs – which encourage local auto production and more investment in the country.

Fiat Chrysler chief executive Sergio Marchionne remarked that in the medium term, “this thing” will settle and the auto industry will be back to some level of normality. He, however, noted that alternatives to such move are “relatively ugly,” not just for Europe, but in general.

Roland Berger recently said that import embargoes against Western vehicles would hurt Russia by cutting tax and tariff revenues, warning that “automotive sanctions” are possible. Roland Berger said that the current situation in Russia would benefit Asian carmakers.

With the ruble dropping 11 percent in value since Feb. 28, carmakers are adopting the strategy made Japanese makers when the yen was depreciating – producing where they are selling. Carlos Ghosn, CEO of the Renault-Nissan Alliance, noted that devalued ruble and higher tariffs mean that selling imported cars is “quasi-impossible” in Russia, which could be circumvented by localizing production.

Ford of Europe Chief Operating Officer Barb Samardzich quipped that Russia push for local production is “in our best interest.” So far, Ford has not slowed its investment in the country since the more it localize and get in rubles, the less exposed it is to the current crisis. Light vehicle sales in the country dropped 12 percent in the first eight months of 2014, according to consulting firm Roland Berger.

If you liked the article, share on:


Login or Create new account to add a comment!


Most of you may have heard or already have one of those autonomous home appliances doing the house chores. Thus, it’s not anymore unusual to see a car going places...
by - October 20, 2016
Mini has just provided the world with a preview of its first hybrid model that employs petrol-electric power to propel its wheels. Derived from the second generation of the Mini...
by - October 20, 2016
For the second time in three years, German driver Marco Wittmann of BMW Team RMG reached the summit in the DTM Drivers’ Championship. Even though Wittmann only secured a fourth...
by - October 20, 2016
The recent motor show has given us a lot of promising vehicles to look forward to for the time being. After we caught a glimpse of the future of motoring,...
by - October 19, 2016
Almost immediately after its launch, car designers have rendered their own adaptations of the new BMW 5-Series (G30). It’s just how it goes. Most folks with very creative minds couldn’t...
by - October 19, 2016