March 10, 2022–The volume of working auto production facilities in Russia has dropped by 45% since the invasion of Ukraine. On March 3, work continued in Russia on 55% of the facilities for assembling LCVs and passenger cars, comparing to 2021. Last year, domestic operations produced 83% of sales in Russia.

Work continues at AutoVAZ (in Tolyatti and Izhevsk), Stellantis and Mitsubishi alliance (PSMA Rus plant), Autotor (Kia and Hyundai assembly), Nissan, Haval, GAZ, UAZ, Mazda Sollers and Isuzu. The total number of vehicles produced by these enterprises has reached 766,000, which is 55% of the sales produced by the Russian automotive industry last year. The total annual production capacity of Russian automotive industry is about 2.7 million vehicles.

After implementation of Western sanctions and the volatility of currency exchange, automakers started raising prices and stopped production and shipping cars. Companies such as Volkswagen, BMW, Renault, Mercedes, Hyundai, Toyota, Sollers Ford have announced the temporary closing of factories. Closed import to Russia Audi, Porshe, GM, Jaguar Land Rover, Lexus, Volvo, Honda, Mazda and others.

Some market players expect full suspension of automotive production because of sanctions, problems with logistics and the shortage of components. The length of idle time depends on external factors and on industry ability to adapt to new situation.

Read The Article

PSR Analysis: The main production problem in Russia today is based on logistics issues. These issues can halt car production for some time. However, some Russian plants, like UAZ, can switch back to older models, which can be built with domestic components only. At the same time, Chinese companies will quickly fill the gap. South Korea says it is going to continue to supply cars to Russia. Toyota and Lexus announced they will not leave the Russian market and Subaru said it will continue to export to Russia.   PSR

Maxim Sakov is Market Consultant – Russia Operations for Power Systems Research

March 10, 2022–Foreign companies which have paused their business operations in Russia must resume their work, or face bankruptcy of their Russian division.

Foreign companies made huge investments to localization production in Russia, and they don’t want to leave the Russian market, but they face unprecedent pressure by their own regulators. In this situation the government has developed three scenarios for foreign concerns’ subsidiaries which have production plants in Russia.

The first option involves the company continuing normal operations in Russia, with a supply of materials and components required for production. The second option is that foreign co-owners transfer its shares to their Russian partners, and later they can go back to Russian market. Some investors have already selected this option.

And the third option involves the company quitting work in Russia, shutting down production and firing employees. “We consider this as inspired bankruptcy,” said a Russian official.

The last scenario is actually nationalization of the foreign operation, and it will be applied as an extreme measure because no manufacturer wants to lose its investments and profits. It’s also bad for the Russian party because in can lead to problems at the bankrupted plants, related to patent violations, and lack of components. The patents can be neglected in the current situation, but there is no substitution for foreign components at this time.

Read The Article

PSR Analysis: It looks like the confrontation scenario was calculated in advance, and both parties here will bear significant losses. PSR

By Maxim Sakov, Market Consultant – Russia Operations

March 10, 2022—The American company Caterpillar, specializing in construction and mining machines, has suspended work at its plants in Russia because of the situation in Ukraine. Caterpillar said it is donating more than US$ 1 million to the victims of the crisis.

“We are deeply saddened by the tragic events continuing to occur in Ukraine and hope for a peaceful resolution to the crisis. Through the Caterpillar Foundation, we are donating more than $1 million to support both urgent and long-term needs of the Ukraine humanitarian crisis. We are complying with all applicable laws and evolving sanctions, while remaining focused on our employees, dealers and customers. Operations in Russia have become increasingly challenging, including supply chain disruptions and sanctions, and we are suspending operations in our Russian manufacturing facilities” – said in the company statement.

According to the company website, it has a production plant in Tosno (Leningrad region) and a distribution center in Moscow region.

Read The Article

PSR Analysis: Evidently, Cat business in Russia continues, however in reduced size. It’s not possible to maintain production operation with absence of parts. Same reasons were stated in press-release of Hitachi, which has also suspended production in Russia with Cat and Komatsu.   PSR

Maxim Sakov is Market Consultant – Russia Operations, for Power Systems Research

March 10, 2022—The KAMAZ plant, which was hit by sanctions, has production orders only until the end of March. Currently, the OEM is working through orders for April and May, according to a company official. Company operations are linked to supplies from Europe, which have been halted, he said.

He also added that production continues, but changes in model range cannot be avoided. The main efforts of the OEM will be concentrated on deeper localization of trucks and rearranging production using local components.

Daimler has suspended co-operative 12-year truck operations with KAMAZ. According to a Daimler spokesman, it will not supply components to KAMAZ and will not assemble trucks in their joint venture.

Read The Article

PSR Analysis: KAMAZ already faces a shortage of foreign-made components, and may have problems making trucks with Cummins engines, ZF transmissions and Bosch fuel systems. These components will be substituted with parts made by KAMAZ and its local partners until the end of March.

Earlier, assembly operations in Russia were suspended by truck makers Volvo, Scania and MAN.  PSR

Maxim Sakov is Market Consultant-Russia for Power Systems Research

The UAZ-Component company, part of the Ulyanovsk Automotive Plant, has started making crankshafts for engines Hyundai Gamma 1.6. The first serial lot of 3000 crankshafts  was shipped in December 2021.

The UAZ crankshaft was designed according to Hyundai requirements, and the components made by UAZ are being installed in Hyundai Solaris, Creta, Kia Rio and other car models.

First castings were made according to computer models. Upon finishing this stage, Hyundai representatives conducted audits on the UAZ working site. Then, first lots were shipped to Hyundai plant in Sestroretsk for finishing works. All tests were successful. At the end of 2021 UAZ received the approval for use of its crankshafts.

In January, the supply volume reached 10,000 units, then volume is planned to increase to 20,000 units per month.

Read The Article

PSR Analysis: It looks like a second stage of localization automotive components with Hyundai (first stage included local assembly of the engines themselves). PSR

Maxim Sakov is Market Consultant – Russia Operations for Power Systems Research

Tutaev Motor Plant has completed creation of 18.5 liter 8 cylinder Vee diesel engine TMZ-8807.10 with two turbochargers, electronic operation system and iron cast cylinder block heads. The powertrain pushes out 653 hp and is a part of new engine family, the TMZ-880. The development of the TMZ-880 family was started in 2016.

The new engine will be tested on the AG combine Palesse KVK-8060 made in the Belorussian Gomselmash plant in 2022. It will replace the German Mercedes OM-502LA. Decisions about mass production will be made, depending on test results

Read The Article

PSR Analysis: A few years ago, Tutaev Motor plant became part of the KAMAZ structure. Since then, it has received a good boost in development. Among the new projects of TMZ are a joint venture with Chinese Weichai, and a new HHP engine range. PSR

Maxim Sakov is Market Consultant – Russia Operations for Power Systems Research

PowerTALK, January 2022

KAMAZ said it is installing new 6-cylinder engines working on methane gas and having 720 HP on its trucks. Switching to NG fuel is one of the main trends of the Russian automotive giant. It builds Inline 6 and V8 engines

Inline 6 cylinders engine will be made in several versions but the 720 hp will be available in the top model only. For the economy segment, the OEM will offer a 450 hp engine;  the price of this model will be significantly cheaper.     Read The Article

PSR Analysis: A few years ago, KAMAZ started developing new 6-cylinder inline engines in co-operation with Liebherr. The R&D now is program successfully expanding into a new stage, developing a new range of HHP NG-powered engines.    PSR

Maxim Sakov is Market Consultant – Russia Operations, for Power Systems Research

Autotor said it plans to start mass production of electric cars next year. One of the new models will be a city car for young drivers, and second one will be a car for people with limited liabilities.

The OEM already has developed a concept vehicle with the designers from Europe, and there are plans to assemble a test lot of several thousand electric vehicles in 2023. Three possible OEMs are considered as partners in the venture:  Kia, Hyundai and BMW.

Read The Article

PSR Analysis: Considering that there is almost no market for electric passenger cars in Russia, the OEM can expect limited demand for these new cars. And without massive development of a charging infrastructure, there will be no chance for this market to develop. Additionally, climate conditions also add problems for electric car owners and reduce their sales potential. PSR

Maxim Sakov is Market Consultant – Russia Operations, for Power Systems Research

The Fund of Industrial Development has approved a loan of US$ 27 million (2 Bln rubles) under the “Priority Projects” program, which will allow Ural to build axles at a new production facility. The new site will allow OEM to double production of heavy load trucks and to create about 4,000 jobs.

Currently, these axles are being purchased in China. Ural is going to make this product for its own use, and for sale to other truck makers. Production under the program is expected to begin in 2023.

The money will be spent to purchase automatic lines with CNC control to work on drums, hubs, and brake disks, and also for renovation of forge production. In 2025, the OEM plans to make at least 18,800 drive axles for its own needs, and about 5,000 components for special machines. Under the project, Ural will produce 13 models of on-road axles, and 20 axle models for road construction machines.

Read The Article

PSR Analysis: This is another example of State support for the Russian automotive industry. PSR

Maxim Sakov is Market Consultant – Russia Operations, for Power Systems Research

The South Korean company Sungwoo Hitech, a manufacturer of auto components that is part of the Hyundai group, has purchased an abandoned Ford plant in Vsevolzhsk.

Details of the deal have not disclosed. However, the plant, which is partly stripped and which has been idle for two years, is being sold for US$ 20 million, a total considered to be far below market value.

For now, the new owner said it is not planning to resume car production there, but the company said it is going to rehab the plant and start production in 2023. Sungwoo Hitech said at this time it plans to invest about US$ 70 million and employ 520 people. Production capacity will be about 265,000 units per year.

Sungwoo Hitech has been working in Russia since 2010. With production in Leningrad region, it supplies the Hyundai plant with bumpers and frames for car doors.

Read The Article

PSR Analysis: The trend of Western car makers yielding the Russian market to companies from Asia is clearly visible. However, this purchase is puzzling because it’s not clear what product the new owner is going to produce in the plant.     PSR

Maxim Sakov is Market Consultant – Russia Operations for Power Systems Research