Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Car Heavyweights Pull Into Town

Unknown
An invitation-only crowd large enough to fill a soccer stadium swamped the Krasnaya Presnya fairgrounds Thursday to hawk and gawk as Russia's largest auto show kicked into gear for the fifth year.

Autosalon-2001 doesn't officially open until Friday but already organizers are predicting a record 700,000 enthusiasts will drop by over the next six days to check out the latest in two-, four-, six- and eight-wheeled technology.

More than 600 domestic and foreign companies are in town to showcase scores of trucks, buses, motorcycles, spare parts and luxury cars. But beyond the shiny chrome, scantily clad models and liquid crystal displays can be heard debates among industry players about changing import tariffs, protective measures and how to build Russia's struggling auto sector.

Although foreign makers are seeing stunning growth in their Russian operations — doubling and tripling sales over last year — they still claim just 15 percent of the market, with the bulk of that being second-hand vehicles.

New initiatives by the government are designed to keep those numbers from budging anytime soon. Tariffs on small-engine car imports, for example, have just risen — a move critics say is a protectionist band-aid response to President Vladimir Putin's recent calls for struggling automobile makers to crank up their quality and quantity.

"It's clearly a protective measure to support AvtoVAZ," which produces the ever-popular Lada and Zhiguli, said UFG auto analyst Yulia Zhdanova. Some importers will see a small decline, she said.

A separate tariff hike begins in January for certain used cars, a move officials say would keep Russia from becoming a dumping ground for old and less ecologically friendly cars.

General Motors, meanwhile, is temporarily halting imports in response to a Justice Ministry ruling that leaves unclear how much foreign carmakers have to pay in customs duties.

At the same time, however, several foreign producers are reporting stunning growth: GM, for example, said that 2001 sales are up 600 percent from a year before; Volkswagen doubled sales to 3,102 cars in the first half of the year, and Mercedes has seen 350 percent growth in sales of its best-selling 500 series.

Other companies are gearing up to start production in the country over the next few years after halting plans or putting off initiatives in the wake of Russia's economic meltdown in 1998. On Thursday, Asian giants Hyundai Motors and Toyota both announced plans for the Russian market. South Korea's Hyundai said it would import 70,000 compact passenger cars over the next five years to be reassembled here, and Japan's Toyota said it had set up its first sales unit in Russia, Reuters reported.

GM last week transferred the first $40 million of a record $332 million deal with Tolyatti-based AvtoVAZ to make Niva jeeps. And U.S. manufacturer Ford Motor Company's $150 million investment in a Leningrad region facility will start rolling out vehicles next year.

Ford, for one, said a prime reason behind its starting up assembly here was to work around paying import taxes on cars and parts. "Start your own plant with full assembly and you avoid the 25 percent import duty," Henrik Nenzen, Ford president for Russia and CIS, said on the sidelines of Autosalon-2001.

The show's organizer, ITE Group, said that manufacturers' enthusiasm for the Russian market was reflected by the fact that more new models of a wider class range were rolled into town this year than ever before.

"This year is far more prestigious, in as much as the models the companies are showing," said David Bagley, ITE director for motor and transport shows.

Those include domestic automaker GAZ's Volga, the car of choice for anything Soviet and bureaucratic, that was displayed alongside a newer, hipper model with perhaps a telling advertising slogan: "You surprise me!"

Yet some cars on display might never see the light of day in this country — not least because wallets are not as thick as they are in Western Europe, not to mention the import duties. The Dodge Viper runs at $65,000 but would sell for around $100,000 if imported, a company representative said. BMW's Z-9, a demo car that is the only one in the world, was unveiled to much fanfare, though it won't even go up for sale in Germany till later next year.