Lada Upgrades Turn Underdog Into Road Hog

How, the old joke goes, do you double the value of a Lada? Answer: You fill up the gas tank.

One company, however, has come up with a more serious -- and marketable -- alternative to boost the value of Russia's underdog auto.

Moscow's Lada Engineering buys Ladas, Samaras and Nivas straight off the line from their producer, Russia's biggest automaker AvtoVAZ, and gives them a radical makeover.

With an exterior styling upgrade and a mechanical overhaul, Lada Engineering's products can compete with imports, both off the starting line and on the bottom line.

In the process, the medium-sized Russian company has begun to fill a shaky but profitable niche between Russia's low-priced lemons and more-expensive imports.

Its success is a sign that Russians want to buy Russian cars that local mechanics know how to service. It is also a sign of the vast demand in Russia for reasonably priced Russian-made cars that work better than basic Zhigulis or Volgas.

Boris, 24, who works for a food importing company, bought his Samara from Lada Engineering almost a year ago for $16,000. His car was fitted out with a tuned engine, leather trimmed racing seats, upgraded suspension and a good stereo. The car also sports two giant spotlights on the front and an air wing with a built-in brake light on the rear, something that Boris finds very stylish.

Asked why he chose a Lada when he could have picked a second-hand European model or even a brand new Ford Escort for the same money, he said: "I like it, I really do. It's solidly built, I don't have any problems, it's very comfortable. But when I go to buy a foreign car, I'll get a really good one, and brand new."

Lada Engineering started selling standard Ladas back in 1991 at the dawn of market reforms, but the company's general director, Igor Sevryukov, said it always put a special emphasis on the quality of the autos it sold.

Other private dealers, including the country's biggest Lada dealer Logovaz, were more often than not selling cars that arrived from the AvtoVAZ factory as nedokomplekti.

A typical nedokomplekt (it means "a thing that is not complete") lacks taillight bulbs, sometimes the taillights themselves, various plastic knobs, tool kits, jacks, spare wheels, wipers and a host of other small things that could be easily removed from the car during transport without much damage to the body. Lada Engineering went to great pains to buy the missing parts on the flea markets and then sell refitted nedokomplekti at a higher price.

"We always looked after quality, even when the cars arrived from the factory as though they had come out of a Lego kit," Sevryukov said. Shortly after it began trading, the company built its own service station, a warehouse and a carwash, and acquired a spiffy showroom.

Lada Engineering spotted a hole in the market when it saw that wealthy New Russian drivers were growing increasingly fascinated with fancy extras. They were fitting their Ladas with illuminated double wipers, sun protection shades on the rear window -- in winter -- or, the ultimate in pretension, a BMW mascot and grille on the Lada bonnet.

Lada Engineering then began fitting an imported styling kit that was first designed in Belgium, a major importer of Ladas. That softened the snub nose of the traditional Lada design and gave the car a softer look.

By early 1995, Lada Engineering moved into more fundamental remakes of the basic Lada models, calling on a group of autosport enthusiasts, led by its current technical director Kirill Pogozhev and prominent Russian rally driver Arkady Kuznetsov. Pogozhev, in turn, prompted the company to try to improve Lada's engine performance, transmission characteristics and handling.

The process at first involved stripping down Ladas and then bolting in sporting components, all the while working closely with the Lada technical research laboratory in Tolyatti, home of AvtoVAZ. But at the end of the 1995, AvtoVAZ, hit by declining sales and rising costs, was forced to give up its autosport program, which meant there were no more sports spares.

Pogozhev invited in people who knew how to build engines from scratch and Lada Engineering really began to engineer its own -- very different -- Ladas. In the hands of experts, the original Samara 1600cc engine with its standard 80bhp output was boosted to deliver 105bhp for a tuned Samara model called Sonnet. A bigger 1700cc engine was built to produce 120hp. The popular Niva off-roader, tuned at Lada Engineering under the name of Solo, got an 1800cc motor that peaks 105bhp at a lower rev range.

"When people see what we've got, they say: 'Give me everything!'" Sevryukov said.

About 200 of these heavily tuned cars are sold each year. Lada Engineering plans to increase production to 300 cars a year in 1997.

Lada Engineering is not alone in the remake business. Another firm, Mega-Lada, operates out of the AvtoVAZ home base in Tolyatti. But Lada Engineering seems to have kept the lead, at least in Moscow.

"All these technical innovations require a lot funds that go into research and testing, but the whole thing is very time consuming," Sevryukov said. "This is not the easiest business. That's probably why we don't have a lot of competition -- it's too much trouble."

The real issue for Lada Engineering is that the expensive extras that have radically changed Ladas' looks and performance from the basic factory models have also put its cars in about the same price range as bottom-end European and South Korean cars. While a simple styling kit adds about $1,000 to Lada's basic price of around $8,000, the cost of a fully remade model can be huge.

"It's not rare that the client orders a fully tuned car with all the extras, and it usually costs about two base prices," Sevryukov said.

Most of his customers are wealthy private companies and banks, or big state organizations, like the Interior Ministry or security services. Western companies are also on the list.

Patricia Isayeva, an auto analyst at MC Securities, said big companies, where top executives are entitled to expensive foreign cars, often pick Ladas for their rank-and-file employees. And in the provinces, Lada is still the most common choice. Relatively cheap and durable, it is easy to fix without the electronic equipment required for servicing most foreign models.

According to Isayeva, the car-tuning business will probably continue at its current pace so long as the quality of basic domestic models remains so poor.

"Their sales volumes are small and any serious breakthrough is out of the question," she said of Lada Engineering. "But if Russian auto plants survive as such -- at least VAZ and GAZ -- and if they don't produce any models close to Western standards, such companies will grow. They will always find someone to buy 300 cars a year, especially outside the big cities."

Lada Engineering itself is aware that Western competition could be edging in on its niche. In its showroom, right next to its hotted up Ladas are inexpensive Czech Skodas and Spanish SEATs, both from the German Volkswagen auto group.

The company was prompted to stock imported cars after a scare in September last year when AvtoVAZ cut car supplies to dealers. AvtoVAZ used all of its car stock to pay off debts to components suppliers.

"If their assembly line stops altogether, we'll lose our market niche," said Sevryukov. "That's why we got into selling Skodas and SEATS."