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. Last Updated: 07/27/2016

Chinese Cars Roll Into Russia

MTBeijing Jeep hopes to ride the Admiral pickup into the Russian truck market.
If Russian drivers have been slow to discover the pickup truck, some enterprising Siberians are more than ready to make the introduction -- by way of an affordable Chinese 4x4.

While Koreans, Japanese and Germans focus primarily on Russians' demand for quality cars and SUVs, a Novosibirsk-based company called Pekinsky Dzhip, or Beijing Jeep, is edging into the booming automobile market with a rugged Chinese-made pickup. If it all goes according to plan, Beijing Jeep will soon have a nationwide chain of dealerships and open a Russian assembly plant by next year.

"The market for pickups in Russia is absolutely empty," said Leonid Pobedin, Beijing Jeep's vice president. Annual U.S. sales of Ford pickups alone exceed 1 million, he said, while the most popular model in Russia -- Mitsubishi's L200 -- had total sales of just 760 last year.

Having mastered the art of dominating world markets with cheap but competitive textiles and electronics, Chinese manufacturers are now looking to export bigger-ticket items, like cars. In 2004 China produced 5 million cars, becoming the world's third-largest automaker after the United States and Japan.

Faced with an overproduction crisis, Chinese carmakers are eyeing the Russian market, which has less quibbles with counterfeits and emissions standards than the United States and Western Europe.

"The Chinese are awfully entrepreneurial," said Igor Morzharetto, deputy editor of Za Rulyom car magazine, who had just returned from a tour of Chinese auto plants. "It's impossible to fight them."

Enter the Admiral, a dead-ringer for a Toyota Hi-Lux, at half the price of the popular Japanese model. Starting at $18,300, the Admiral is made by China's Hebei Zhongxing, or ZX Auto, and distributed by Beijing Jeep. Since October 2004, Beijing Jeep has sold some 400 Admirals, mostly through dealers in regional centers such as Perm and Kazan, Pobedin said.

Nicole Motors, the Moscow dealership that began carrying Admirals last fall, has since sold "a couple dozen" pickups each month, said Dmitry Balashov, the dealership's advertising manager.

Za Rulyom's Morzharetto said the first wave of Chinese vehicles will become a reality this summer, when a majority of them pass certification for sale in Russia. Chinese cars have to be certified, as Beijing is not a member of the United Nations Economic Commission for Europe, a 55-member body that regulates such issues as safety.

In July, Beijing Jeep plans to launch a 6,000-square-meter auto center in Novosibirsk with the goal of selling at least 300 cars a year, including Admiral pickups and SUVs, Pobedin said. After that, he said, the company is aiming to open a Siberian assembly plant by early 2006. "We plan to start with 2,000 a year and to expand to 20,000 a year," he said.

Those are certainly ambitious plans for a company that has been in existence for less than two years. It all started when Siberian oil trader Transervis began looking for reliable pickups but could not find any on the domestic market. When it discovered Chinese pick-ups, Transervis realized it may just have struck gold and set up Beijing Jeep -- the first Russian dealer of Chinese cars -- in summer 2003.

Three more Chinese automakers -- Xinkai Automobile Manufacturing., Great Wall Automobile Holding and China First Automobile Group -- have secured representations in Russia through Moscow-based IRITO chain of dealers. IRITO belongs to a holding that also sells Russian GAZ trucks.

Xinkai's and Great Wall's first batch of pickups and SUVs were certified last fall and some 100 vehicles have been sold by now, said Anna Skleznyova, IRITO's advertising director.

In the near future, both IRITO and Beijing Jeep plan to start importing Chinese-made trucks and buses.

The interest is mutual.

"Russia's potential market is very big," said Wanda Liu, an export manager with Brilliance, a leading Chinese carmaker, by telephone from Shenyang. "We think that Chinese production fits Russian requirements."

Brilliance, which unsuccessfully tried to import its upscale Zhonghua sedans to Russia, may make another attempt in a couple of months, Liu said.

Some market watchers believe that the Chinese cars of today are like the Korean cars of the previous generation -- simple and cheap.

SUVs made by Xinkai and Great Wall sell for between $18,000 and $25,000, and their pickups are priced at about $14,000.

One reason Chinese manufacturers can offer their cars at such low prices is because they hardly invest in research and development. Instead, they copy successful models from market leaders.

Igor Tabakov / MT

The Admiral starts at $18,300, half the price of a Toyota.

In Russia, where intellectual property rights are not well enforced, Chinese carmakers have little to fear.

One day they may very well encroach on the dominant position of Daewoo and Hyundai, said Franz Josef Marx, vice president of Boston Consulting Group in Russia.

"In five years I can imagine it easily," he said. Yet he cautioned that the short-term prospects of Chinese cars in Russia were still dim.

"I don't believe Chinese will invest sufficiently in maintenance services in Russia to penetrate the market in the next three to five years," Marx said.

Opinion was split on the success of pickups like Beijing Jeep's Admiral.

Foreign competition, wherever it comes from, forces the domestic auto industry to get better, said Andrei Koterev, a spokesman for Severstal-Avto, which owns off-road vehicle producer UAZ.

"Russians will have to either increase quality and lower prices or leave," he said.

Alexander Sadovnikov, an editor at Avtomir car magazine, said Russian drivers who choose a Chinese car would be entering uncharted territory.

"No Chinese car has yet covered a distance of 50,000 kilometers [in Russia], so it would be hard to judge performance," he said. "But the assembly quality is no worse than that of domestic cars."

Critics beg to disagree: Nicole Motor's Balashov would be the first to admit that the Admiral is not a high-end vehicle.

"A person who buys Chinese should be ready for problems," said Balashov. "How can a car with an originally damaged pedigree work up the market?"

The Admiral might just answer that question.