Russia the engine for European car industry
Even as GM is scaling back elsewhere in Europe, the company is increasing production in Russia, which is becoming a bright spot for GM and much of the rest of the motor industry.
Trickle-down oil wealth and the spread of easily accessible car financing are lifting sales, which rose 40 er cent in the first half of this year compared with the same period a year ago. GM, Ford, Volkswagen, Nissan and Renault are all opening new plants, or intend to do so soon.
The new GM line in this picturesque town, an old centre of the Russian car industry on the Volga River, will manufacture 30,000 Aveo sedans a year. Cars, held up on jacks, move along the assembly line and end up in a brilliantly illuminated inspection room, where every centimetre is carefully examined; the factory is trying to get defects down to GM standards. If all goes well, production will start next month.
The site is one of half a dozen that GM has in Russia, where it intends to invest $US1 billion ($964 million) over the next five years. The money is a good bet, analysts of the Russian market say, for the same reason that politics recently got a jolt with street protests: the Russian middle class is rising and becoming a force in both commerce and public life.
"I would put Russia in the same breath as China," said Timothy Lee, the head of GM's international division, at a groundbreaking ceremony last northern summer for a factory in St Petersburg, which will make middle-priced cars.
Russian car sales are approaching 3 million cars a year, says the Association of European Businesses, which tracks sales as part of its efforts to promote trade between Russia and the European Union.
Russia is projected to surpass Germany and become the largest car market in Europe in 2014. In August, Russians bought more cars than Germans did, before sales tapered off in the northern autumn.
"It makes sense to invest where you have a good growth," said Vladimir Bespalov, a motoring analyst with VTB bank. "This is the trend, and the growth is in the emerging markets."
Frequently Asked Questions about this Article…
The article says growth is being driven by trickle-down oil wealth, the spread of easily accessible car financing and a rising Russian middle class. Those factors helped lift sales by about 40% in the first half of the year compared with the same period a year earlier.
According to the article, Russian car sales are approaching 3 million cars a year. Industry groups project that Russia could surpass Germany and become the largest car market in Europe (the article cites 2014 as the projection year), and in August Russians bought more cars than Germans did.
The article names several major manufacturers expanding or opening plants in Russia, including General Motors, Ford, Volkswagen, Nissan and Renault. It notes these companies are investing in new production capacity to serve the growing market.
GM intends to invest about US$1 billion (about $964 million) in Russia over the next five years. The article describes a new GM assembly line in Nizhny Novgorod that will produce roughly 30,000 Aveo sedans a year, and says GM already has about half a dozen sites in Russia.
Timothy Lee, head of GM's international division, is quoted saying he would put Russia in the same breath as China. The comparison is based on fast consumer growth, an expanding middle class and strong demand trends in an emerging market that auto companies see as a major growth opportunity.
The article notes that politics recently got a jolt with street protests, but analysts quoted in the piece still view investment in Russia as a good bet because of the rising middle class and the structural demand growth supporting car sales.
The article describes GM's new plant practices—cars move along an assembly line into a brightly lit inspection room where every centimetre is checked—and says the factory is trying to reduce defects to GM standards before full production begins.
The article suggests that rising sales in Russia and automaker investments there (for example, new plants from GM, Ford, Volkswagen, Nissan and Renault) are creating a bright spot for the European auto industry. For everyday investors, those trends indicate where growth is occurring, though the article itself reports facts rather than giving direct investment advice.
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