Parts production the new key to Russia’s automaking boom

Russia's car market has seen a 67 percent rise in production, and is on course to produce about 2 million cars in 2011. The next step to bolstering its economic impact is to make sure it has the parts made locally.

Expanding the Russian auto sector has been a key part of the government’s attempts to boost manufacturing.The move has paid dividends in recent years as a swathe of global automakers have beat a path to establishing production facilities in Russia, and placed St Petersburg and Kaluga on the car production map.

New government moves are looking to promote more parts manufacture in Russia, not just assembly of units made outside the country.A key part of that strategy is cultivating a domestic autoparts manufacturing sector.

Stanley Root, Automotive Industry Leader, PWC, says the outlook for domestic vehicle sales is likely to bring more parts manufacturers to Russia.

“We’re expecting sales to improve strongly over the next 5-10 years; of those sales we’re expecting the percentage produced in Russia to increase, so there’s a multiplier there, and then the number of components, locally produced in that production is going to increase significantly with the new decree and focus on localization.”

The new rules have raised concerns they may hamper investment in final assembly vehicle plants, but for the most part reaction has been positive, according to Josep Rodo Cima, GM, Gestamp-Severstal-Kaluga LLC

“The decree is good. I think its ok. I don’t see a lot of opportunities for improvement.”

With parts makers being encouraged to set up in Russia, and the potential for them to link up with Renault, Ford, GM and Magna, or any of the other global manufacturers who have shifted production to Russia, the outlook for the Russian auto industry is positive, with it increasingly being seen as a springboard into Eastern European and Central Asian export markets.