The Russian low-cost car market (under $12,000) will be soon swept by the winds of technological change. German and Italian car-makers plan to join the Russian automobile industry, French Renault, American Chevrolet and the omnipresent Chinese in the new trend. Mikhail Prokhorov, a Russian oligarch, has unveiled plans to launch production of the first hybrid vehicle in in Russia.
Mikhail Prokhorov recently presented the concept of an affordable hybrid car to Prime Minister Vladimir Putin and President Dmitry Medvedev. Prokhorov’s ONEXIM Group will partner with Yarovit, a truck maker based in St. Petersburg, to produce the car. The new model is expected to cost 8,888 euros and will feature a hybrid engine fueled both by battery-stored electricity as well as petrol or natural gas, which is 30% more abundant in Russia due to the advent of coalbed methane technology.
Prokhorov plans to invest up to 100 million euros in the project, apart from capital expenditures on manufacturing facilities, and commence production of golf-class vehicles as early as 2012. Initial plans are to manufacture 10,000 vehicles a year. Admirably, ONEXIM hopes to deliver the project without dipping into public funds. According to Victor Khristenko, the Russian Minister of Industry and Trade the investment will be paid back when sales have reached 600,000 vehicles.
Many details of the daring project remain undisclosed, but the basic plan is likely to include several modifications of one model. According to information provided to the Russian media, the Eco hybrid car will be 3.657m long, 1.8m wide and 1.6m high. The maximum speed will be 120 km per hour, and the car will be powered by a lithium-ion battery, and an electric motor coupled with a 0.6-litre combustion engine producing a combined 70 horsepower. Reuters reports that the car body will be made from lightweight composite materials.
Prokhorov’s enthusiasm for promoting an electric vehicle in Russia has come as a big surprise to industry experts. The key to success in launching an electric car business is the availability of support infrastructure, including charging stations. Many countries also offer substantial toll road and parking discounts for owners of electric cars as well as a reduced transport tax rate. All of these factors are non-existent in Russia. As for hybrid cars, the main challenge is providing an accessible maintenance and repair service, which would be of satisfactory quality only at authorised service centres. Building a service network for hybrid vehicles will require additional (and hefty) outlays.
Experts point out other gaps too. “Two years is not enough to develop a new vehicle even with innovative technology”, says Pavel Lyamenkov, deputy sales manager at the Torgmash dealership. The cost of designing the platform alone is around 1 billion dollars, while the project will also entail other components, including production engineering, testing and troubleshooting expenses”.
German Volkswagen chose a different strategy. At a ceremony inaugurating a Russian plant in the autumn of 2006, senior management announced plans to design a new Polo-based sedan (B class under the EU classification) tailored to the needs of Russian customers. Originally, the new model was expected to be priced at 10,000 dollars, but last October the German carmaker updated its estimate to 14,500 dollars. The sedan will be showcased this year at the Moscow International Automobile Salon.
Skoda, which is part of the Volkswagen group, is also working to launch an inexpensive model in Russia. Apart from vehicles built around the Skoda Fabia concept, the company is considering an entirely new car based on the Octavia Tour. According to a Skoda spokesman, the new design should be viewed as the new generation of Octavia Tour. Skoda has one more surprise in store for the Russian market, which is an automobile based on A00. Under the internal VAG classification, the A00 designation indicates the platform developed for the small Volkswagen Up! car. The Czech carmaker is going to produce a similar A-class vehicle, which will be smaller than the Fabia. Skoda’s Russian office confirmed plans to launch a A00-based vehicle, but no official information is available on the design characteristics, except for the fact that the car will enter the market in 2011-2012. The low-cost model will target both Russia and emerging markets.
According to Sollers, which represents FIAT in Russia, the company is likely to go for a small concept under 10,000 dollars, but the spokesman refused to give any details. Several years ago, media reports mentioned FIAT’s intention to revive its low-priced Topolino model, the predecessor of the classic Fiat 500, which has also made a comeback in Europe.
A real ultra-low-cost breakthrough was made by Indian carmaker Tata, which rolled out the world’s cheapest car, the Nano, in January 2008. The preliminary price tag was set at 2,500 dollars for the Indian market. It took four years to develop the car before it hit Indian dealerships. Later Tata said it would after all try and take on Europe with fancier configurations. Presenting Nano at the automobile exhibition in New Delhi, Ratan Tata, CEO of Tata Motors, said that the idea was prompted by the observation that the majority of Indian families use bicycles and scooters with the elder son standing in front, while the younger brother rides in the arms of the mother, who is positioned behind the husband who drives. So Ratan Tata wondered if the company could create a cheap vehicle offering the benefit of a safer and more comfortable ride over bicycles and motorcycles.
According to Tatyana Natarova, PR manager at Nissan Motor Rus, the company unveiled plans in May 2008 to establish a joint venture between the Renault/Nissan alliance and the Indian Bajaj Auto aiming to design, produce and market a low-cost model starting at 2,500 dollars, which would be manufactured in India. “Unfortunately, there has been no news about the project so far. It is possible that the economic downturn has affected the original plans," says Tatyana Natarova. "These are long-term plans so no details are available at the moment. Speaking about inexpensive concepts in general, we realise that the demand is there on the Russian market, and we are working on it, though no specific decisions have been made to this effect as yet”.
Another affordable conceptual model (sedan and hatchback modifications) was shown by Toyota at the Indian salon in January 2010. Based on initial plans, the car will be marketed in India, other Asian countries, South America and Russia. Production of the Etios sedan will start at Toyota’s facility in India at the end of the year to be followed by the hatchback in 2011. The project assumes an annual capacity of 70,000 vehicles priced at 10,000 dollars.
In 2012, Russia’s major carmaker AvtoVAZ intends to begin producing inexpensive B-class cars based on its Kalina model and designed in cooperation with Renault. Also, the recently announced joint venture between Russian Sollers and FIAT is thinking of building C-class cars for the mass market in the long term.
Experts agree that tiny vehicles like the super-cheap Tata Nano will fail to capture the Russian market. “With our severe winters and all the snow on the roads, this car will be useless”, says Konstantin Prokhortsev, an independent car expert. “Volkswagen's affordable concept for Russia is a different matter. It took three years to develop and adapt every single component to the Russian market’s needs. To my knowledge, this model will cost from 12,000 dollars up and will take its place between the Renault Logan and the mid-range Ford Focus. The low-cost sedans will fill a lucrative segment, which has a lot of potential in Russia”.
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