Car sales slump as producers look for fresh injection of foreign technology

Car sales in Russia have dropped 55% so far this year, leaving the Russian market only the 5th largest in Europe.

Locally made cars are doing better than imports, with sales of foreign brands produced in Russia declining 35% in the 1H of 2009 compared with a 50% downturn in sales of Russian brands.

Experts believe these cars will continue to gain share in the Russian market and could benefit even more from access to Opel's technology, with Stanley Root, automotive analyst from PriceWaterhouseCoopers, saying a deal with Opel may offer the country’s automotive sector much needed access to foreign technology.

“A long term tie-up like this could be a way of really embedding the local production of western quality brands here, provided you get access to the technology. And that’s the answer to the question that they need to get a bigger access to technology than they’ve done so far.”

Experts say Sberbank and Magna will compete mainly with US-run private equity firm Ripplewood and not the Chinese Beijing Autos. In its final offer to GM, Sberbank and Magna are ready to split evenly a 55 percent stake but want the rights to all of Opel's intellectual property, which, according to Makhail Pak, an analyst from Metropol Investment, isn’t that appealing for Opel.

“GM is not very happy with it because the company spent billions of dollars in research and development for OPEL and, I think, it is not very willing to just give it away for some kind of a foreign investor.”

Ripplewood is a buyout firm, with less experience in the auto sector than Magna or Beijing Autos, but it has the advantage of political connections in Washington with experts saying it may simply be a vehicle to sell the Opel unit back to GM in five years.

However, the German government is unwilling to extend state aid and guarantees to a private equity bidder, who it fears will cut back Opel in the search for quick profits.