More investment in Russia may offset sanction effects, execs say

Article by Christian A., 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:

Comments

Recommended

November 17 is considered a very special day for Tesla, as this is the day that they revealed the highly anticipated Tesla Semi. But Elon Musk did not think the...
by - November 17, 2017
More details have emerged about the new sixth generation of the BMW M3 just as the German premium practically announced the end of the current-gen 3 Series with the unveiling...
by - November 17, 2017
All is set for Volkswagen’s plans to enter the electric vehicle game, as prompted by the so-called Dieselgate scandal. In fact, the German carmaker has already made a commitment to...
by - November 17, 2017
As BMW has already revealed, the next generation of the BMW M5 (F90) is a four-wheel drive high-performance sedan with overwhelming power output and torque at its disposal. However, it...
by - November 17, 2017
McLaren unveiled a one-off Gold - on - Black 720S at the 2017 Dubai Motor Show which will be on display throughout the entire stretch of this week’s event. The...
by - November 16, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries