Russian billionaire’s company plans to overtake Germany in automotive production

Russian Billionaire Oleg Deripaska is apparently intending to do a partial IPO of his company Russian Machines; paving the way for Russia to be the car manufacturing capital of Europe.

Much to the chagrin of Moscow’s gridlock bound commuters people in Russia keep on buying cars.  The Association of European Businesses (AEB) says more than two and a half million cars were sold in Russia in 2011 – a 39% increase in sales compared to the previous year.  

Deripaska’s Russian Machines is perfectly placed to capitalize on the demand growth.

The corporation is based in Nizhny Novgorod and is an umbrella organization for a number of diverse Russian industrial companies.  The most well known is GAZ, makers of the Volga car.  According to Russian Machines GAZ broke even in 2010, and last year saw a 27% increase in revenue, earning a net profit of more than $169 million.  This upswing can be credited in part to the re-organisation of GAZ facilities which now make parts for three major car companies—Volkswagen, General Motors and Mercedes Benz.

In an interview with RT, the Chairman of Russian Machines Siegfried Wolf says the investment in contract manufacturing in Nizhny Novgorod is paying off, ‘if you can produce for the best in the world, we can be very proud with the Russian team’.

In talking with Bloomberg Siegfried Wolf let slip the IPO was on the way. The company may sell up to 25% abroad for up to $3 bln, “We’re absolutely in shape to do it this year or next,” he said.  

Russian Machines have been championing the concept of ‘cluster functioning’, which Wolf sees as a major benefit to the regional and national economies. ‘The original manufacturer creates at least 4 to 6 indirect jobs from one job, mainly in the supply industry. The process of component manufacturing needs raw material, which means we create a lot of know-how added value for our raw material industry. Thirdly, an automotive supplier does not supply to only one manufacturer, it means we have created a good export opportunity’.

With WTO membership on the doorstep Siegfried Wolf believes Russian car manufacturers are well placed, “European car manufacturers are stable or slightly going backward. Russia has a potential with its own market, the need for their own products could overtake Germany as the biggest car producer in Europe.” Wolf said.  “In the next 2-3 years Russia will be a bigger producer than Germany, and that’s rather a clear goal that we have to achieve.”