Daimler still plans Mercedes plant in Russia despite weak market
Russia's top-selling premium brands through Nov. with % change from a year earlier
1. Mercedes 38,797 -14%
2. BMW 25,349 -21%
3. Audi 23,310 -25
4. Lexus 18,038 +2%
5. Land Rover 10,450 -45
DETROIT -- Daimler remains committed to adding a plant in Russia to support the 'remarkable' performance of its Mercedes-Benz brand, CEO Dieter Zetsche said.
"Yes, that is something we are pursuing," Zetsche told Automotive News Europe this week at the auto show here.
The planned addition to the automaker’s production footprint comes despite a steep decline in Russian car sales. Through 11 months the overall volume in Russia was down 35 percent to 1,454,253, according to data from Moscow-based lobby group the Association of European Businesses.
Zetsche said Mercedes has done "extremely well" despite the country’s overall sales weakness. "Our market share is remarkable," he said. "But, of course, we can’t totally go against the trend."
Mercedes was the top-selling premium automaker in Russia through 11 months with a volume of 38,797 units and a 2.67 percent market share. BMW's share was 1.74 percent while's Audi's was 1.60 percent. Mercedes' sales drop was less than the declines at BMW and Audi (see chart, below).
Russian media reported last April that Daimler had narrowed the possible sites for a plant to three locations: St. Petersburg, where Toyota, Hyundai and Nissan have factories; Tatarstan's capital, Kazan; or the central Russian region of Sverdlovsk.
Sales of luxury cars are doing better than mass-market models as wealthy Russians invest in hard goods because of the weak ruble. IHS Automotive analyst Tim Urquhart said Mercedes' sales in Russia are being helped by the new C-class sedan and the GLA compact SUV, which, he said, is the "right product at the right time" for the market.
He said it might be better for Daimler to establish an alliance with a contract manufacturer first rather than invest in an all-new plant. BMW has done this, contracting Avtotor to build SUVs and sedans from kits in Kaliningrad, Russia.
Avtotor builds the 3-, 5- and 7-series sedans for BMW, together with the X1, X3, X4, X5 and X6 SUVs, according to Automotive News Europe's European car assembly plant map. Avtotor also produces vehicles for Opel, Chevrolet and Kia.
Mass-market brands including Volkswagen and Ford have reduced production at their Russian plants in response to deteriorating market conditions. General Motors has idled its St. Petersburg factory and ended sales of all Opel models and mainstream Chevrolet cars in the market.
New-car sales took their biggest hit this year in November, falling 43 percent year-on-year, according to the AEB.
2016 decline forecast
Russian car sales may fall another 14 percent next year if the country's economy heads into a second year of recession, according to PricewaterhouseCoopers. As few as 1.1 million cars may be sold during 2016 if the slowdown deepens and the government doesn't support the industry, according to the worst-case scenario, Oleg Malyshev, a partner at PwC in Russia, told Bloomberg in December.
When asked whether he sees Russian sales rebounding in 2016, Zetsche said: "It depends on Russia’s overall economic development, which depends on the overall political situation."
To help automakers Russia's government will spend 20 billion rubles ($275 million) to support the car industry in the first half of 2016, Industry and Trade Minister Denis Manturov said last month.
Manturov told Rossiya 24 television the government would extend measures in place since car sales were hit by a sharp drop in the ruble and an economic slowdown because of weak oil prices and Western sanctions over Ukraine.
The measures include a car-buying program that offers discounts to people trading in their old vehicles, a scheme for scrapping cars and subsidies for car loans and leasing. Some of the measures were introduced in 2013 and the scheme was strengthened in 2014 and 2015.