SOUTH KOREAN automakers are taking a cautious approach to the Russian market.
While Fiat, Renault and General Motors are making major production deals with ex-Soviet car manufacturers, the Koreans are starting with low-volume kit-assembly operations. They aim to build up to complete manufacturing over several years.
With the South Korean economy in crisis, the low-key approach in Russia has advantages:
Investment is far lower, and facilities such as paint and stamping shops can be added gradually.
Complete knockdown kits keep production lines in Korea working at a time when domestic demand is declining.
All three big Korean automakers have CKD facilities in Russia.
Hyundai has been the most active. It has just set up its fourth car assembly joint venture. The latest, with industrial group Bars, will build Lantra, Accent and Sonata models in Krasnodar starting this year. Annual production will reach 50,000 cars within five years.
Another venture, with the Khimexmash Enterprise in Balakovoin Russia's Saratov region, will soon start assembling Hyundai Accent and Sonata cars, using only Korean components.
Output will start at an annual rate of 10,000-15,000 units. That will rise to 100,000 by 2005, when the majority of components will be sourced from Russia.
Daewoo has only one assembly operation, but is close to setting up two more.
The existing joint venture, with Red Aksai in Rostov-on-Don, assembled 15,200 Daewoo Nexia and Espero cars in the first eight months of 1997.
Daewoo plans to take over two more Russian operations: the Bryansk Automotive Works and the Taganrog harvester factory.
Neither plant has ever produced cars before. Both will assemble the Nubira, Lanos and Leganza from Korean kits starting this year, then gradually shift to locally-produced components.
Korean companies worry that the Russian government might withdraw tax concessions that have made low-volume kit assembly attractive.
Andrei Kudriashov, deputy head of the State Customs Committee, said his agency plans to limit the import of car-assembly kits by:
Possibly introducing quotas on kits imported into Russia
Redefining the country of origin for kit cars assembled in Ukraine, Belarus and Uzbekistan.
Kudriashov has proposed lower tariffs for importers, if they agree to set up facilities in Russia for painting, welding and body production.