| To remain a leader in the Russian market, the Japanese decided to build a plant here The flagship of the Japanese automobile industry, Toyota Motor Corporation, which ranks third in the world ranking in terms of production volumes (about 5.8 million cars per year), has finally dared to take its first step into the Russian market. Leading Japanese economic newspaper Nihon Keizai Shimbun reported on Saturday that Toyota will build its first assembly plant in Russia in 2008. However, the foreign and Russian press have already notified the public more than once about the impending arrival of the Japanese concern in Russia, and therefore these plans have long been perceived by the expert community as almost a fait accompli.
Asian automakers are aggressively expanding the geography of their sales markets. Toyota Motor has more than 50 divisions around the world, almost half of which are involved in the production of components and assembly (this year a small car assembly plant will go into operation in the Czech Republic). Russia, according to Toyota management, is the second market in terms of growth potential after China. However, until now, representatives of the corporation have been cautious in their statements about plans regarding Russia - while demonstrating interest, they nevertheless preferred not to specify details and timing.
Now, according to Nihon Keizai, the corporation's management has made a fundamental decision to organize assembly production in Russia in 2008. Other parameters of the project are also known: the Japanese intend to spend up to 10 billion yen, or about $100 million, on the construction of a Russian plant. It is assumed that the enterprise, focusing on Russians with average incomes, will produce Corolla small cars and Camry middle-class cars. It is planned to produce about 15 thousand cars per year. There is no word yet on expansion prospects, however, as a rule, assembly plants are initially designed for larger production volumes with the prospect of expanding them at least twice.
The location of the plant has not yet been finally determined, however, the Moscow region and Nizhny Novgorod are being considered as alternative sites (also named in the media as Tataria, Yaroslavl and Khabarovsk). Experts have previously argued that it is more logical for Toyota to locate production not in the east of Russia, which is already conquered by used Japanese cars, but in the European part. At the same time, they assumed that production would most likely be organized as a joint project at the facilities of a Russian enterprise (GAZ, AvtoVAZ, etc.) with the financial and technological participation of the Japanese side. However, according to Nihon Keizai, Toyota management emphasizes that this will not be a joint venture, but a plant completely managed by the managers of the Japanese company. Apparently, the Japanese concern, which at one time relied on product quality and occupies a leading position in the world ranking of car reliability, considered cooperation with the Russian manufacturer unacceptable for itself.
Despite such a detailed description of the project in the media, it has not yet been agreed upon with the Russian authorities. According to a Nihon Keizai report on Saturday, a final agreement with the Russian government will be reached before the end of this year. It is expected that in 2004 not only will all documentation procedures be completed, but the actual construction of the plant will begin.
Russian authorities have repeatedly demonstrated to Tokyo their interest in Japanese investments. Thus, a meeting with Toyota management was an important point in the program of ex-Prime Minister Mikhail Kasyanov during his visit to the capital of Japan in December last year. Kasyanov tried to convince Toyota management to invest in the Russian auto industry. The Japanese insist on the removal of protective export duties on foreign cars as an indispensable condition for Russia's accession to the WTO. And due to the reduction in export costs, the need to organize internal assembly, which with duties allows to reduce costs, would disappear. However, following the visit, Mikhail Kasyanov still stated that Toyota was thinking about organizing assembly production in Russia. According to the prime minister, even before negotiations with Japanese businessmen, he received signals from political circles that Japanese companies were serious about their intentions to invest in the Russian auto industry.
Toyota had previously thought about organizing its production in Russia. It is known that a similar project was considered in the late 1990s, but then investors were frightened off first by the financial crisis and then by political instability in the country. Over the past two years, information about the construction of a Toyota plant in Russia has appeared with enviable regularity.
Thus, in April 2003, Nihon Keizai reported that in the next three to four years, Toyota was going to build production of LandCruiser SUVs and Corolla models. However, this information was then denied by Toyota Motor Vice President Fumitaka Kawashima, saying at the Moscow Motor Show in August last year that there are no specific plans for organizing production in Russia yet, although the corporation has similar intentions. At the end of September, there was a rumor that the Japanese were finally abandoning the idea of building a plant in Russia, since, according to their calculations, it was more profitable to import finished cars under the current system of taxation and customs duties. Meanwhile, high-level contacts indicated that the parties were exploring opportunities for cooperation.
In the summer, Presidential Envoy Sergei Kiriyenko, interested in foreign investors coming to the Volga region automobile plants, visited Japan, and in October the chairman of the corporation, Hiroshi Okudo, came to Nizhny Novgorod on a return visit. Japanese Kyodo News interpreted the purpose of his visit as an assessment of the production capabilities of Russian facilities. Toyota representatives visited GAZ, UAZ and Izhmash (in May of this year it became known that Toyota, along with Peugeot-Citroen, was negotiating with AvtoVAZ about creating a joint venture in Russia to produce modern diesel engines). After which information appeared that the Japanese want to get not just an assembly plant, but a plant with a full cycle, which will not only expand sales in Russia, but also export products to Europe. However, for example, Mr. Okudo spent only 20 minutes at GAZ, during which time he managed to reject the work of the factory quality control service and did not make any proposals to either GAZ or other factories.
As Kyodo News reported in January, after Mr. Kasyanov’s December visit to Tokyo, Toyota will organize assembly in Russia on the condition that “annual sales of its cars on the Russian market will double and reach 50 thousand cars per year.” In the coming year, according to official forecasts, Toyota intends to sell about 30 thousand cars due to increased demand for Lexus.
The fact that the main obstacle to organizing profitable production in Russia (of course, in addition to the underdeveloped market for auto components) is the still insufficient level of sales was officially confirmed by the management of the concern. In an interview with Britain's The Times in March, company president Fujio Cho, while expressing satisfaction that exports of finished vehicles were growing steadily, said: “The volume is not sufficient to justify the creation of local production capacity. We believe that eventually we will have to build a plant in Russia. Within a decade, this could become a reality.” And in early August, representatives of the Ministry of Industry and Energy reported that the president of the Japanese Association for Trade with Russia, Tasuku Tagaki, came to discuss the plan to build an automobile plant with the participation of Toyota in June. According to officials, no agreements were reached.
Meanwhile, if in absolute figures sales figures do not reach the “landmark” 50 thousand, then the growth dynamics of these indicators are impressive. The concern began selling cars in Russia through its own trading houses more than ten years ago, but the demand was small at that time. In 2001, Russians purchased a little more than 4 thousand new cars - only 5% of all foreign cars sold in Russia. In 2002, sales more than doubled - 8,302 Toyota cars and 328 Lexus. And last year brought Toyota to the forefront among foreign concerns present in Russia - sales more than tripled, reaching a record 25 thousand cars plus another 1,397 Lexus - allowing the concern to increase its market share to 16%.
Saturday's Nihon Keizai does not say what prompted the Japanese to speed up the decision to build a plant in Russia this time. Observers believe that this could be facilitated by an unexpected decline in sales and the threat of Toyota losing its leadership in the Russian market. Thus, according to the Committee of Automobile Manufacturers of the European Business Club, in the first quarter of this year, Toyota sold only 2.8 thousand cars in Russia and not only lost its leadership position in the foreign car sector to the South Korean company Hyundai (3.6 thousand cars), but also allowed outperform American Ford and Korean Daewoo (3.2 thousand each). However, according to the results of the first half of the year, the Japanese still managed to change the balance of power in their favor and again take a leading position with a sales volume of 19.4 thousand cars. However, the Koreans are literally nipping at their heels: Hyundai took second place, having sold 18.2 thousand cars in six months (sales of Ford and Daewoo amounted to 16.57 thousand and 15.95 thousand cars, respectively).
Representatives of domestic car factories are confident that Toyota, having come to Russia with its own production, will not compete with the products they produce : Russian cars are aimed at consumers with lower purchasing power. However, Toyota is liked not only by fans of foreign cars, but also by owners of Russian-made cars. Online survey “If your next car is a foreign car, which one?” (was held last week on the website www.ladaonline.ru, the audience of which is 85% Lada car owners) revealed the leadership of Toyota. The Japanese brand was named by 17.9% of respondents, and the German BMW was in second place with 11.9%.
The past financial year ended successfully for Toyota Motor. The corporation received a record profit of $10.22 billion, twice as much as its competitors General Motors and Ford Motor. Overall, Toyota Motor's overall profit grew by 55% in the last fiscal year. The company's shares rose in price by 26%. Yana VIKTOROVA |
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