German pavilion at Moscow’s Interauto – weak domestic economy
Statement delivered by Dr Kay Lindemann, Managing Director of the German Association of the Automotive Industry (VDA), at the Interauto in Moscow on 28 August 2014
For the seventh time, German suppliers have a joint pavilion at Russia’s trade show for suppliers, the Interauto in Moscow. This year the companies are presenting themselves under difficult conditions – both political and economic. The Russian light vehicle market, which had recovered surprisingly fast after the crisis of 2008 to 2009 and expanded by almost 11 per cent to 2.94 million units in 2012, recorded a 5.5 per cent decrease to 2.78 million new vehicles in 2013. Last year Russia’s domestic economy was already showing signs of weakness and the rouble was devalued, which made imports significantly more expensive. This trend has become even more pronounced during the current year: the new vehicle market in Russia has contracted by nearly 10 per cent since January, to 1.41 million units, and in July alone the decrease amounted to 23 per cent.
German manufacturers and suppliers are showcasing their new products at the Moscow International Automobile Salon (MIAS) and the suppliers’ trade fair Interauto. Once again, the VDA has initiated a German pavilion with support from the German Federal Ministry for Economic Affairs and Energy (BMWi), in co-operation with AUMA (Association of the German Trade Fair Industry). The Munich international trade fair service IMAG is the implementation partner. Nine medium-sized suppliers and the “Supplier Cluster Russia” are presenting a broad range of automotive technology. Furthermore, the VDA is distributing information about the German automotive industry. Many suppliers from Germany produce in Russia, and some of them also have their own stands at the exhibition.
In the years 2011 and 2012, the German group brands were still strongly increasing their passenger car sales in Russia: by 56 per cent to 478,500 units in 2011 and by 28 per cent to 613,200 new vehicles in 2012. Their market share was over 20 per cent. Yet even the German group brands could not escape the market slump in 2013. While the overall light vehicle market shrank by 5.5 per cent, sales by the German manufacturers fell by 4.5 per cent to 585,800 passenger cars.
This year so far (January to July), sales of passenger cars from German groups have dropped by almost 14 per cent to 286,200 new vehicles. The market share going to the German group brands still exceeds 20 per cent.
A similar picture emerges for exports to Russia. In 2011 exports soared, increasing by a good 61 per cent to reach 150,200 units. In 2012 there was a modest rise of over 4 per cent to 156,800 new vehicles. In 2013, however, exports decreased by around 16 per cent to 132,400 vehicles. In the first half of 2014 a total of 63,500 new cars were exported to Russia, which was a year-on-year fall of just over 3 per cent.
In Russia, too, the German manufacturers are pursuing their “two-pillar strategy”: exports are supplemented by local assembly. After ramping up in the years 2011 and 2012, in 2013 there was only slender growth of 2 per cent to 183,600 vehicles. In the first half of 2014 local production did indeed rise by around 15 per cent to 102,600 units, but here also growth may be expected to decrease owing to the weak overall market.
German suppliers have been active on the Russian market for several years now. In 2013 the value of exports to Russia of parts, accessories and engine components rose slightly to 2.68 billion euro (cf. 2.66 billion euro in 2012) – despite the already shrinking light vehicle market. However, this year (January to May 2014) the value of exports has decreased by 18 per cent, to 943 million euro. The German firms supply both international and Russian manufacturers.
No matter how different the starting positions were, the Russian automotive industry has increased its exports to Germany for the past eight years, although it began at a low level. In 2013 the value of exports climbed by nearly 27 per cent to 65.4 million euro. The first five months of the current year brought a rise of a good 41 per cent, taking the figure to 32.1 million euro.
It is remarkable that parts, accessories and engine components – suppliers’ products – account for more than 80 per cent of all automotive exports to Germany. In 2013 exports from Russian suppliers totalled 54.4 million euro (83 per cent), whereas their value in the first five months of 2014 was 28 million euro (87 per cent).
The Russian market offers long term potential. The VDA recognises the primacy of politics and hopes that the current political conflicts can soon be resolved. Russia’s accession to the WTO in 2012 – after almost two decades of negotiations – was welcomed by the VDA. However, stable overall conditions and a level playing field are necessary for leveraging Russia’s potential as a vehicle market and production location.
One crucially important feature of the Russian automotive market is the suppliers’ improved product and process quality. To this end the VDA founded a Quality Management Center (VDA QMC) in Moscow six years ago, which went into operation at the beginning of 2009. German manufacturers and suppliers also need suppliers on the Russian market who satisfy the German brands’ world-wide high quality requirements. Employees are therefore being trained in accordance with the standards and guidelines established jointly by manufacturers and suppliers in the VDA QMC in Germany, either at the VDA QMC Russia in Moscow or at in-house courses on the manufacturers’ or suppliers’ premises. Over the first half of 2014, a total of 400 participants were trained by Russian-speaking quality management experts.
The curriculum includes quality management systems, quality management auditing in line with the international standards of the VDA and ISO/TS 16949, and practical quality assurance tools. The VDA QMC also compiles corresponding publications in Russian for this purpose. The VDA QMC has more than 60 corporate customers, including Russian branches of German suppliers such as Benteler, Bosch, Brose, Continental and Knorr-Bremse, along with Russian firms and of course German manufacturers such as Volkswagen and Daimler.
Further information about the German pavilion and exhibitors‘ contact details can be found on the internet, at: http://www.interauto.german-pavilion.com.
The following suppliers are represented at the pavilion:
- Brose Fahrzeugteile GmbH & Co. KG, Coburg
- Dörken MKS Systeme GmbH & Co. KG
- Edscha Holding GmbH
- Formel D GmbH
- Hosch Industrieklebstoffe
- Kiekert AG
- Lübke & Vogt GmbH & Co. KG
- peiker acustic GmbH & Co. KG
- SCHERDEL GmbH/ OOO SCHERDEL Kaluga
- Supplier Cluster Russia / HS Consult