The Russian Automotive Market - s3. · PDF fileEmmanuel Quidet Partner ... GNI per Capita...

GLOBAL AUTOMOTIVE

CENTER

MARCH 2005

The RussianAutomotive MarketIndustry Overview

1

Contents

Opening Comments 2

Automotive Production in Russia 3

The Passenger Car Market 3

The Bus Market 6

The Truck Market 7

Russia Within the Global Automotive Market 8

Foreign Brands Produced in Russia 11

Foreign Car Sales 14

Consumer Trends & Prospects 18

Government Reforms 20

Ernst & Young’s Involvment in the Automotive Industry 24

Solutions for the Issues that Matter 24

Global Automotive Center 26

Contacts in Russia 28

2

OPENING COMMENTS

THE RUSSIAN AUTOMOTIVE MARKET

Russia belongs to the fastest growing emerging automotive

markets. While demand for quality new vehicles in the coun-

try continues to surpass optimistic forecasts, domestic manu-

facturers are heading towards saturation of production

capacity.

But car consumers are more selective and price sensitive

than ever. Attractive automotive credit conditions, competi-

tive warranty packages, and comfortable after sales service

now belong to the basic toolset of any foreign car dealer striving for success throughout

the country.

In this report we present key market indicators gathered over the last three years. This

is just a glimpse of what we can do for you while you consider market entry or expan-

sion of business activities in Russia.

We hope you find the following information insightful, and welcome you to share your

most challenging questions on this exciting business environment with us.

Emmanuel Quidet

Partner

Head of the Industrial Products Group

Opening Comments

3

The Passenger Car Market The Russian passenger car market is estimated at 1.76 million vehicles in 2004,

up 10.5 percent year on year1. While the import of used cars accounts for less then

20 percent of overall consumption, the production of foreign car makers more than

tripled, to over 133,000 units, which represents 7.5 percent of overall Russian car

market in 2004.

Automotive Production in Russia

Russian Production Foreign Production* Import New Cars Import Used Cars

2004 2003 2002

6.9% 63.1%

0.7%

29.2%

59.9%12.3%

3.4%

24.4%

19.1% 55.4%

18.0%

7.5%

Passenger Car Market Compared

Source: ASM Holding, Autoreview, Autoizvestia, Ernst & Young estimates * Includes production by foreign legal entities, joint ventures, and production by Russian entities with foreign assemblylicenes

1 Includes overall import and domestic production figures. In 2004, approximately 110,000 cars produced

in Russia were exported to other emerging markets.

4

AUTOMOTIVE PRODUCTION

IN RUSSIA


Passenger Car Production 2002–2004 (units)

Source: ASM Holding

Company City 2004 2003 2002 2003/2004 2002/2003Change in % Change in %

AvtoVAZ Togliatti 717,985 699,889 703,040 2.6 -0.4

IZH-Avto Izhevsk 82,687 78,497 65,751 5.3 19.4

GAZ Nizhny Novgorod 65,686 56,783 65,648 15.7 -13.5

GM-AvtoVAZ Togliatti 57,737 21,839 323 164.4 6,661.3

KamAZ Naberezhny Chelny 41,207 40,016 38,743 3.0 3.3

UAZ Ulyanovsk 31,136 32,748 33,648 -4.9 -2.7

TagAZ Taganrog 30,000 5,896 2,490 408.8 136.8

Ford Motor Co. Vsevolozhsk 29,703 16,261 2,474 82.7 557.3

Avtotor Kaliningrad 14,525 8,415 5,713 72.6 47.3

Others 39,292 49,684 62,231 -20.9 -20.2

TOTAL 1,109,958 1,010,028 980,061 9.9 3.1

Despite strong growth in new car imports,

Russia’s car production in 2004 rose

almost 10 percent compared to the previ-

ous year. Taken on its own, production by

Russian manufacturers rose 2.1 percent

to over 976,000 units2. Currently, Russia’s

automotive production capacity runs

at approximately 90 percent of overall

production capacity.

Russian car prices soared by 15 percent

on average in 2004, matching base

prices of several of the foreign models

sold in Russia, some of which are now

produced in the country.

2 Does not include Chevy Niva and Viva production.

5

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

797,

924

835,

104

867,

693

985,

284

839,

487

954,

381

968,

092

1,02

0,51

5

980,

061

1,00

9,58

5

1,10

3,85

2

Units

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Passenger Car Production in Russia 1994–2004

Source: ASM Holding

6

AUTOMOTIVE PRODUCTION

IN RUSSIA


The Bus Market Bus production in Russia remained prac-

tically unchanged in 2004 compared to

the previous year, in which clear growth

was tangible in the larger bus segments

(city, intercity buses). The minibus sector,

which account on its own for approxi-

mately 50 percent of total Russian bus

output, went down over 15 percent.

Scania-Peter, the only foreign bus

producer in Russia, raised production

to 147 Intercity buses, a growth of 56 per-

cent compared to 2003.

Bus Production 2002–2004 (units)*

Source: ASM Holding*Includes production of minibuses


GAZ Nizhny Novgorod 31,522 36,299 32,229 -13.2 12.6

UAZ Ulyanovsk 17,037 21,553 18,898 -21.0 14.0

PAZ Pavlovo 12,114 11,323 10,358 7.0 9.3

KAvZ Kurgan 2,073 1,607 1,239 29.0 29.7

LiAZ Likino 1,844 1,674 1,561 10.2 7.2

NefAZ Neftekamsk 968 726 481 33.3 50.9

RUSIKAR (Tushino-Avto) Moscow 664 544 683 22.1 -20.4

Scania-Peter Saint Petersburg 147 94 28 56.4 235.7

GolAZ Golitsino 104 129 61 -19.4 111.5

Others 9,736 2,629 1,770 270.3 48.5

TOTAL 76,209 76,578 67,308 -0.5 13.8

7

Truck Production 2002–2004 (units)*

Source: ASM Holding*Includes production of light trucks


GAZ Nizhny Novgorod 117,043 108,317 100,258 8.1 8.0

KAMAZ Naberezhny Chelny 29,243 24,228 20,055 20.7 20.8

UAZ Ulyanovsk 18,528 22,596 16,934 -18.0 33.4

IZH-Avto Izhevsk 13,810 15,717 12,485 -12.1 25.9

AMO ZIL Moscow 12,867 13,061 11,810 -1.5 10.6

UralAZ Miass 6,826 5,994 8,589 13.9 -30.2

Others 3,895 4,638 4,119 -16.0 12.6

TOTAL 202,212 194,551 174,250 3.9 11.7

The Truck Market Truck production in Russia went up 3.9 percent year on year to over 202,200 units.

The light truck segment accounts for approximately 80 percent of overall truck

production, with GAZ as the leading manufacturer.

KAMAZ, holding the strongest market share in the heavy truck segment, raised output

by 20.7 percent year on year to over 29,200 vehicles in 2004.

8

RUSSIA WITHIN THE GLOBAL

AUTOMOTIVE MARKET


0 50 100 150 200 250 300 350 400 450 500 5500

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Gro

ss N

atio

nal I

ncom

e (G

NI)

per C

apit

a (U

S$)

Passenger Cars (per 1,000 people)

India

Mexico

Brasil

Argentina

Russia

South Korea

Slovakia

HungaryPoland

Ireland

Czech Republic

Estonia

Denmark

UK

Finland

Spain

USA

France

Austria

Germany

Italy

TurkeyChina Moscow

GNI per Capita (US$) vs. Passenger Cars (per 1,000 people)

Source: World Bank, The Little Green Book 2004, Atlas Method, Ernst & Young estimates

Russia Within the GlobalAutomotive Market According to the World Bank, Russia’s

car fleet per 1,000 people stands at

147. However, Moscow alone, with over

10 million inhabitants, has approximately

260 cars per 1,000 people, which is

slightly higher than the Polish car density

per 1,000 people.

Russia’s automotive industry is still

highly vertically integrated. The country’s

most urgent concern is to create an

attractive investment climate for foreign

suppliers while protecting the Russian

supplier industry, which is currently

undergoing significant changes.

Almost 50 percent of Russia’s car fleet

is over ten years of age.

9

Brand Main Product Range Brazil China India Mexico Poland Russia Thailand

Borg Warner Powertrain Components • • • • •Bosch Automotive Equipment • • • • • • •Cummins Engines • • • • •Delphi Integrated Systems and Modules • • • • • •Eaton Fluid Power and Electrical Systems • • • • • •Faurecia Modules for Light Vehicules • • • • • •Johnson Controls Seats, Interior Trim, Batteries • • • • •Hella Lighting, Electronics • • • • • •Lear Automotive Interior Solutions • • • • • •Tenneco Exhaust Systems • • • • • •Valeo Engines and Engines Parts • • • • •Visteon Modules and Components • • •

Supplier’s Worldwide Manufactoring Involvement in Emerging Markets

* Technical assistanceSource: Ernst & Young, company’s own data

The 15 Largest Vehicle Producing Countries*

* Production in millionsSource: OE Industry Review 2004, J.D. Power andAssociates

Country Production Production Changein 2004 in 2003 in %

USA 12.15 11.84 2.6%

Japan 9.91 9.99 -0.8%

China 5.34 4.01 33.2%

Germany 4.94 5.02 -1.6%

South Korea 3.62 3.12 16.0%

France 3.61 3.56 1.4%

Spain 2.83 2.96 -4.4%

Canada 2.62 2.52 4.0%

UK 1.87 1.83 2.2%

Brasil 1.77 1.60 10.6%

Mexico 1.41 1.50 -6.0%

India 1.41 1.02 38.2%

Russia 1.21 1.17 3.4%

Italy 1.19 1.29 -7.8%

Thailand 0.95 0.74 28.4%

*

While international suppliers learn

how to adapt to the needs of smaller

markets in order to remain competitive

within the global automotive environ-

ment, Russian suppliers must improve

quality and productivity, and adapt

to the needs of those foreign OEMs

with current or planned manufacturing

activities in Russia. This context raises

the possibility of potential cooperation

agreements in Russia’s automotive

industry.

10

RUSSIA WITHIN THE GLOBAL

AUTOMOTIVE MARKET


Source: company's own data, Ernst & Young* As of January 1, 2005 all Daewoo cars exported by GM-Daewoo are branded as Chevrolet. The Daewoo brand name is allowed to be used only in South Korea, Poland, Romania, and Uzbekistan.

OEM’s Worldwide Involvement in Emerging Markets

Brasil China India Mexico Poland Russia Thailand

BMW Group

BMW • • • • • •DaimlerChrysler

Chrysler • • • • •Mercedes • • • •Mitsubishi • • • •Fiat Group

Fiat • • • •IVECO • • • • •Ford Group

Ford • • • • • • •Mazda

Volvo • • • • • • •GM Group

GM • • • • • • •Daewoo* • • • •Opel • • •Subaru •Suzuki • • • • •Honda Group

Honda • • • • •Hyundai Group

Hyundai • • • •Kia • • • •PSA Group

Citroen • •Peugeot • • •Renault-Nissan

Nissan • • • • •Renault • • • •Toyota Group

Toyota • • • • • •VAG

Audi • • • •Skoda •VW • • • • • •

11

AVTOTOR

Foreign Brands Produced in Russia

Established: 1997

Production capacity: 60,000(2 plants)

Type of investment: 100% brownfield

Planned production: BMW 3-Series (E-90)

Model Production Production Begin in 2004

Kia

Rio 2000 5,646

Sportage 1998 2,489

Magentis 2001 1,905

Carnival 2000 995

K2700 II/ 3000S/ 3600 II* 2003 123

11,357

BMW

5-Series (E-60) 2003 1,620

3-Series (E-46) 1999 714

7-Series (E-65)* 2004 115

2,449

Chevrolet

Tahoe 2004 451

Trail Blazer 2004 269

720

HUMMER

H2 2004 122

122

Total production 14,648

* Production cancelled

CompanyProfile

Avtoframos

Established: 1997

Location: Moscow

Targeted production capacity: 120,000

Type of investment: JV – brownfield

Planned production: Renault Logan


Renault

Symbol* 1998 517

Total production 517

* Production cancelled

CompanyProfile

12

FOREIGN BRANDS PRODUCED

IN RUSSIA


GM-AvtoVAZ

Established: 2001

Location: Samara

Production capacity: 100,000

Type of investment: JV – greenfield


Chevrolet

Niva 2002 55,150

Viva 2004 288


CompanyProfile

Ford Motor Co.

Established: 2002

Location: Vsevolozhsk


Type of investment: 100% greenfield

Planned production: Ford Focus II


Ford

Focus 2002 29,703


CompanyProfile

IVECO-UralAz

Established: 1994

Location: Chelyabinsk region


Type of investment: JV


Iveco

IVECO-Ural-6329 1997 92

Total production 92

CompanyProfile

IZH-Avto

Established: 2003

Location: Izhevsk




Kia

Spectra 2004 592


CompanyProfile

13

Scania-Peter

Established: 2000

Location: Saint Petersburg

Production capacity: 200

Type of investment: 100% greenfield


Scania

Citybus OmniLink 2002 145

Intercity OmniLine 2004 1


CompanyProfile

ScanTat Alabuga

Established: 2000

Location: Elabuga (Tatarstan)

Production capacity: < 500

Type of investment: JV – brownfield


Scania

Bars 2000 25

Total production 25

CompanyProfile

TagAZ

Established: 1997

Location: Taganrog



Planned production: Hyundai Porter


Hyundai

Accent 2001 20,777

Sonata 2004 6,591


CompanyProfile

Volvo-Vostok

Established: 2003

Location: Zelenograd

Production capacity: < 500

Type of investment: JV


Volvo

FM12 2003 220

FH n.a. n.a.


CompanyProfile

14

FOREIGN CAR SALES


Foreign Car Sales

Hyundai*

Toyota

Ford*

Daewoo

Mitsubishi

Nissan

Kia*

Renault*

Opel

Mazda

Peugeot

Volkswagen

Suzuki

Honda

Skoda

Volvo

BMW*

Citroen

Audi

Mercedes

2004 2003

0 10,000 20,000 30,000 40,000 50,000 60,000

Sales of Foreign New Cars from Major Automotive Brands

Source: Autoreview, Autoizvestia*Includes Russian production

2004 Best Sellers

Class A Class E

Daewoo Matiz Toyota Camry

Kia Picanto BMW 5-Series

Suzuki Wagon R+ Audi A6

Class B Class F

Hyundai Accent Mercedes S-Classe

Hyundai Getz Audi A8

Kia Rio BMW 7-Series

Class C SUV

Ford Focus Toyota RAV4

Daewoo Nexia Nissan X-Trail

Mitsubishi Lancer Mitsubishi Outlander

Class D 4x4

Nissan Primera Toyota Land Cruiser 100

Toyota Avensis Toyota Land Cruiser Prado

Hyundai Sonata Suzuki Grand Vitara/XL7

15

Japan USA France

South Korea Germany Czech Republic Others

2002

26.6%

20.3%

6.6%

17.6%

15.9%

8.6%

4.3%

13.4%

2003

35.8%

12.8%

12.0%

17.7%

3.8%4.6%

2004

37.3%

12.0%

8.6%

8.0%

1.6% 2.6%

29.9%

New Car Import by Country 2002–2004

Source: Ernst & Young

Foreign car sales soared to almost

340,000 units in Russia in 2004,

up 72.2 percent year on year. Russia’s

relatively low customs duties (25 percent

ad valorem) on imported complete built

units (CBU) ensure consumer satisfac-

tion, but have not yet prompted other

original equipment manufacturers

(OEM) to begin manufacturing activities

in the country. And the commitment

of further OEMs in Russia would act as

a catalyst for the development of the

industry.

Russia ranks twelfth among

the top countries producing vehicles

worldwide.

16

FOREIGN CAR SALES


EU

Russia

South Africa

China

Mexico

India

Brazil

Vietnam

10,000 15,000 20,000 25,000 30,000 35,000 40,000

Customs Duties on a US$ 10,000 ImportedNew Car by Country

Total wholesale price includes all customs payments,excise and offsetable VAT. For this example a new vehicle with CIF value of $ 10,000; 1,600 cc gasolineengine; the country of origin is Japan; CommodityClassification Code 8703 23 was selected. Simulation as of September 1, 2004.

Source: State regulatory documents of the respectivecountries, Ernst & Young

Presence of Foreign Brand Dealershipsin Russia

Source: Auto Market of Russia, 2003

Moscow 242

St. Petersburg 75

Sverdlovsk District (Ekaterinburg) 34

Republic of Tatarstan (Kazan, Elabuga, Nab. Chelny) 24

Rostov District (Rostov-na-Donu) 23

Samara District (Samara, Togliatti) 20

Permsk District (Perm) 18

Krasnodarsk Region (Krasnodar, Novorossiisk, Sochi) 15

Tumensk District (Tumen, Nishnevartovsk, Surgut) 12

17

1 – ScanTat Alabuga (city, intercity buses)2 – GolAZ (city, intercity, suburban, tourist buses)3 – IZH-Avto (cars, LCVs)4 – Avtotor (cars, SUVs, 4X4)5 – KAVZ (suburban buses)6 – LiAZ (city, intercity buses)7 – IVECO-UralAZ (trucks),

UralAZ (trucks)8 – AMO ZIL (cars, light trucks, trucks),

Avtoframos (cars)RUSIKAR (city, intercity, suburban, tourist buses)

9 – KAMAZ (cars, trucks)10 – NefAZ (all-terrain, city, suburban buses, trucks)11 – GAZ (cars, mini buses, LCVs, trucks)12 – PAZ (city, intercity, suburban buses)13 – Scania-Peter (city, intercity buses)14 – TagAZ (cars, LCVs)15 – AvtoVAZ (cars, SUVs, LCVs)

GM-AvtoVAZ (cars, SUVs)16 – UAZ (4X4, LCVs)17 – Ford Motor Co. (cars)18 – Volvo-Vostok (trucks)

Moscow8

TbilisiAstana

Minsk

Kyiv

Togliatti15

Neftekamsk10

Miass7

Ulyanovsk16Izhevsk3

Kurgan5

Naberezhnye Chelny9

Pavlovo12

Kaliningrad4

Golitsino2Likino6

Zelenograd18

Taganrog14

Elabuga1

Vsevolozhsk17

Nizhny Novgorod11

St. Petersburg13

Map of European Part of Russia

Moscow

Tbilisi

Baku

Astana

Minsk

Kyiv

Togliatti

Neftekamsk

Miass

UlyanovskIzhevsk

Kurgan

Naberezhnye Chelny

Pavlovo

Kaliningrad

Golitsino Likino

Zelenograd

Taganrog

Elabuga

Vsevolozhsk

Nizhny Novgorod

St. Petersburg

Source: company's own data, Ernst & Young

18

CONSUMER TRENDS & PROSPECTS


< 10,000 10,000–20,000 20,000–40,000 40,000–80,000 > 80,000

2004 2003 2002

28.3%

45.0%

19.3%34.2%

39.2%

19.5%35.4%15.1%

7.7%

1.1%

5.5%

1.6%

5.7%

1.6%

40.7%

Car Consumption per Price Segment (in €)

Note: the foregoing diagrams illustrate the number of vehicles sold per segment category according to nominal baseprices. A vehicle with a base price in a lower price segment may end up in a higher price segment due to the purchaseof options that significantly change the vehicle’s price. Chevy Niva and Viva sales not included.

Source: Ernst &Young, based on sales results provided by Autoreview

Analysts continue to underestimate

the Russian car consumption appetite.

Slow, but nonetheless tangible, success

of foreign dealerships in the regions is

a clear barometer of the rising purchasing

power of Russians. But everywhere,

in the capital as well as in the regions,

car consumers are demanding and price

sensitive. Often the choice of one make

or another is made based on additional

options inluded in the base price.

Russia’s car industry is estimated

at US$ 22.858 billion in 2004 as

compared to approximately US$ 13 bil-

lion the previous year. Purchase

of Russian cars (excluding foreign brands

produced in Russia) accounted for

US$ 7.377 billion, up 54 percent

compared to 2003.

Consumer Trends & Prospects

19

Average Price per Car (in US$)

Source: Avtoizvestia* Includes most foreign vehicles produced in Russia

2004 2003 2002 2003/2004 2002/2003Change in % Change in %

Cars produced in Russia 7,800 5,000 4,150 56 22

Imported new cars 31,600 22,500 17,300 40 30

Purchase of foreign cars (excluding

foreign brands produced in Russia)

accounted for US$ 7.769 billion in 2004.

The average price for foreign cars pur-

chased on the Russian territory has

changed as such:

The ability to quickly adapt to the needs

of emerging markets is listed among

the key challenges of several automotive

manufacturers and suppliers. It is

a crucial aspect of strengthening global

competitiveness in an increasingly tight

market while securing manufacturing

activities in home countries.

20

GOVERNMENT REFORMS


Government Reforms

Overview of Recent Reformsin RussiaBelow is an overview of major

reforms implemented within the last

three years.

Tax Reform

• Profit tax legislation: beneficial

deductibility rules and nominal rate of

24 percent

• Personal income tax rate of 13 percent

for residents3

• Standard VAT rate of 18 percent.

Leveling down to 13 or 16 percent

In discussion

• Regional tax exemptions are possible

(Kursk, Leningrad region, Nizhny

Novgorod, Novgorod)

• Reduction of profit tax rate from 24

percent to 20 percent In discussion

• Restriction of profit tax benefits pro-

vided by local authorities (ensures

compliance with local rules and regu-

lations from day one)

• Reform of payroll taxes

Legal Reform

• Improvement of minority shareholder

rights. Extension of competence

areas at shareholder meetings, as

well as improvement of dividend

controls, directorship, and financing

methods

• Corporate law: introduction of a new

order (One Window principle) for

company registration with the local

authorities by the Ministry of Taxes

and Levies. Interested parties are per-

mitted to obtain all the information

about a company from the registering

authority

• Registration also required for an entre-

preneur as a physical body

• The establishment and annulment of

a commercial organization has to be

permitted by the Antimonopoly

Ministry

• Law on consumer protection: intro-

duction of liability to the vehicle

importer New*

3 A resident must be present in Russia for at least 183 days a calendar year

* Since January 2005

21

• Currency control law. Restricted cur-

rency operations among residents and

non-residents

• Introduction of a housing code

designed to stabilize the legal

environment surrounding the real

estate sector New*

Trade Reform

• Establishment of a free market space

covering the territories of Russia,

Belarus, Ukraine and Kazakhstan

• Abolishment of licenses required

for leasing. A foreign court can

be assigned for cross-border-leasing

contracts. Leasing payments can be

made in foreign currency

• Liberalization of the capital market:

free convertibility of the ruble by the

year 2007

• Liberalization of access by foreign

insurers to the Russian market

Banking and Finance Reform

• Implementation of a deposit insurance

system to secure the stability of the

banking sector and the rights of indi-

vidual depositors New*

• Tightening of anti-laundering legisla-

tion to provide more transparency

in payment processes New*

• Implementation of an institution for

tracking the credit records of borrow-

ers New*


Land Reform

• Possibility for foreigners to purchase

land in Russia (with the exception of

certain classes of land, i.e., agricultural

land and areas near military bases, etc.)

• Russian regions now permitted to

decide some questions concerning

land located within their territories

• Introduction of several measures on

residential and town planning codes,

and land transfer New*

Customs Duties Reform

• New Russian Customs Code (Since

January 1, 2004). Introduced simpli-

fied procedures for importers

• Customs clearance fee based on the

customs value of the imported goods

New*

• Customs tariff groups on automotive

parts at 5 percent, 10 percent, 15 per-

cent, and 20 percent

• Introduction of a flat import tariff

on automotive parts at between

3 percent and 5 percent ad valorem

In discussion

• Introduction of pre-shipment

inspection In discussion

22

GOVERNMENT REFORMS



23

• Introduction of a list describing

documents to be included in customs

declarations

• Declaration review period reduced

from 10 days to 3 days (delays must be

explained by authorities)

• Specific simplified procedures

established for certain categories

of importers (Green Channel)

• Customs authorities empowered

to ensure protection of intellectual

property

• Introduction of optional means

for customs payments: bank

guarantee, lien, or appointment

of third person

• New options for legal action against

the customs authorities

• Reduction of customs check

points throughout the country as

an effort to counter gray imports

and corruption

Import

• Increased import customs duties on

used cars, especially those over seven

years of age

Export

• No export customs duties

currently apply to automotive industry

products

Other Duty Reduction Programs

• In-kind contributions and fixed

assets imported as in-kind contribu-

tions to the charter capital of

a company with foreign investments

are free from customs duties and

VAT

• Deferral of customs payments up

to 34 months with respect to fixed

assets owned by a foreign leasing

company and rented and imported by

a Russian legal entity. This deferral is

interest free and based on the step-by-

step application of customs regimes

for temporary import and release into

free circulation

Key to Abbreviations

CBU: Complete Built Unit

CKD: Complete Knocked Down

JV: Joint Venture

LCV: Light Commercial Vehicle

OEM: Original Equipment Manufacturer

SKD: Semi-Knocked Down

The obtaining of customs and tax privileges

is a rather complex procedure requiring

careful planning and preparations.

24

ERNST & YOUNG INVOLVEMENT

IN THE AUTOMOTIVE INDUSTRY


In Russia as in the rest of the world, Ernst

& Young has a strong team of automotive

specialists. Ernst & Young provides its

automotive clients with audit and assur-

ance services; advises them on corporate

and personal tax matters; helps them with

legal issues and explains the particulari-

ties of the local legislation; offers finan-

cial solutions and due diligence services;

and provides valuable market insight and

business development strategies to make

a success of operations in the CIS.

E&Y Involvement in the AutomotiveIndustryErnst & Young – Solutions for the Issues that Matter

Frequently Asked Question

Is it worth entering the market yet?

What are the current incentives favor-

able to foreign engagements in Russia?

How can we best take advantage of the

Russian tax system?

What is the involvement of our

competitors?

Key Competence Area

•Feasibility study

•Market (niche) dynamics scenario

analysis

•Risks and key success factors analysis

•Tax incentive planning

•Evaluation of target management and

planning

•Strategic analysis of key competitive

advantages and weaknesses

•Tax customs and VAT review planning

•Market research

•Sensitivity analysis

25

Frequently Asked Question Key Competence Area

Do we need a Russian partner?

Is the partner we are targeting the right

choice for us? Does he have the right

permits and licenses for our business?

What is best: green- or brownfield

investment?

In which region should we open

an office?

How do we value our investment?

How can we get a "head start" while

integrating companies, people,

processes, and technologies?

•Partner fit criteria

•Partner screening and selection

•Timeframe

•IAS and US GAAP Audit

•Financial and commercial

due diligence

•Background check

•Legal due diligence

•Financial modeling

•Tax incentives planning

•Business processes modeling

•Partner search

•Business valuation

•Analysis of business environment

in specific regions

•Business strategic valuation

•Financial modeling

•Scenario analysis

•IT due diligence

•Human Capital

•Business processes alignment

26




Global Automotive Center

Ernst & Young has redefined professional services for the automotive industry with

a highly focused and integrated approach. Our dedicated teams of seasoned industry

professionals – with comprehensive OEM and supplier experience – conceive,

develop, and help clients implement high-quality, high impact solutions.

Please contact one of our area leaders for further details.

Global LeadershipJock Lennox

Global IP Leader

(UK)

Tel.: 44 [0]20 7951 0374

Michael Hanley

Global Automotive

(US)

Tel.: 1 (248) 457-3914

Steven Blackman

European Automotive

(UK)

Tel.: 44 [0]20 7951 2918

OperationsGerard Langlais

Global IP

(US)

Tel.: 1 (401) 457-3772

Stefan Schulze

European Automotive

(Germany)

Tel.: 49 (6196) 996 28002

ArgentinaBenjamin Harriague

Tel.: 54 (11) 4318-1520

AustraliaSean Balding

Tel.: 61 (3) 9288-8535

BelgiumRudi Braes

Tel.: 32 (03) 270-12 35

BrazilLuiz Frazao

Tel.: 55 (11) 3523-5212

CanadaDana Tunks

Tel.: 1 (416) 941-1762

ChinaClive Saunderson

Tel.: 86 (10) 8518-8324

Anthony Wu

Tel.: 852 2846-9866

DenmarkOle Neerup

Tel.: 45 3587-2503

FranceGilles Puissochet

Tel.: 33 (1) 55-61-09-63

Marc Stoessel

Tel.: 33 (1) 46-93-66-26

GermanyPeter Fuss

Tel.: 49 (6196) 996-27446

Stefan Schulze

Tel.: 49 (6196) 996-28002

ItalySalvatore Florena

Tel.: 39 (06) 3247515-653

Luigi Ragusa

Tel.: 39 (02) 80669-712

JapanYoshinobu Shimizu

Tel.: 81 (3) 3503-1122

MalaysiaHabib Abdul

Tel.: 60 (3) 2087-4102

27

MexicoFausto Sandoval

Tel.: 52 (555) 283-1471

NetherlandsWarmolt Prins

Tel.: 31 (40) 260-2210

NorwayRolf Berge

Tel.: 47 24-00-23-56

SingaporeShyan Yan Ho

Tel.: 65 6428 7261

South KoreaTae-Ho Hong

Tel.: 82 (2) 3787-6690

SpainJordi Olle Palou

Tel.: 34 933-663-704

SwedenJan Birgerson

Tel.: 46 58-286-3343

Sven-Arne Gardh

Tel.: 46 31-63-78-43

SwitzerlandYves Vontobel

Tel.: 41 (58) 286-3346

TaiwanCharles Lai

Tel.: 886 (2) 2720-4000

United KingdomSteven Blackman

Tel.: 44 [0] 20 7951-2918

Jock Lennox

Tel.: 44 [0] 20 7951-0374

USMichael Hanley

Tel.: 1 (248) 457-3914

Gerard Langlais

Tel.: 1 (401) 457-3772

VenezuelaJesus Figueroa

Tel.: 58 (241) 823-79-59

28




Dmitry Tetiouchev

Senior Manager, Legal

Tel.: 7 (095) 755-9691

E-mail: [email protected]

Jean-Francois Tremblay

Manager, Automotive Segment Leader

Tel.: 7 (095) 755-9692


Oleg V. Lukianchikov

Analyst, Center for Business Knowledge (CBK),

Industrial Products Group

Tel.: 7 (095) 705-9700


Contacts in RussiaEmmanuel Quidet

Partner, Audit

Head of Industrial Products

Tel.: 7 (095) 938-6659


Reece Jenkins

Partner, Corporate Tax

Tel.: 7 (095) 705-9736


Paul Murphy

Partner, Transaction Advisory Services

Tel.: 7 (095) 705-9708


29

The foregoing does not constitute formal advice.

Ernst & Young does not guarantee the accuracy,

adequacy, or completeness of any information

and shall not be liable in any manner for any

error or omission of the results obtained from use

of this material.

No part of this report may be reproduced or

used in any form (graphic, electronic, or

mechanical, including photocopying, record-

ing, typing or information storage and retrieval

systems) without the permission of the copy-

right holder – Ernst & Young (CIS) Limited.

For permission, please contact the Automotive

Group at Ernst & Young, Moscow.

© 2005 Ernst & Young.

All Rights Reserved.

Ernst & Young is

a registered trademark.

www.ey.comERNST & YOUNG

RussiaMoscowSadovnicheskaya Nab., 77, bld. 1Moscow, 115035Tel.: 7 (095) 705-9700

7 (095) 755-9700Fax: 7 (095) 755-9701

St. PetersburgWhite Nights House Business CenterMalaya Morskaya Street, 23ASt. Petersburg, 190000Tel.: 7 (812) 103-7800Fax: 7 (812) 103-7810

NovosibirskInskaya Street 54, 2nd floorNovosibirsk, 630102Tel.: 7 (3832) 11-9007Fax: 7 (3832) 11-9008

EkaterinburgWorld Trade CenterKuibyshev Street, 44Ekaterinburg, 620026Tel.: 7 (343) 379-3510 Fax: 7 (343) 379-3511

Yuzhno-SakhalinskProspect Mira, 149Office 103Yuzhno-Sakhalinsk, 693007Tel.: 7 (4242) 49-9090Fax: 7 (4242) 49-9411

AzerbaijanBaku Hyatt International CenterHyatt Tower III Izmir Street, 1033 Baku, AZ1065Tel.: 994 (12) 490-7020Fax: 994 (12) 490-7017

BelarusMinskVoronyanskogo Street, 7A Office 709Minsk, 220039Tel.: 375 (17) 228-1221Fax: 375 (17) 228-1222

GeorgiaTbilisiLeselidze Street, 44 Tbilisi, 0105Tel.: 995 (32) 75-1065Fax: 995 (32) 75-1066

KazakhstanAlmaty Furmanov Street, 240 GAlmaty, 050059Tel.: 7 (3272) 58-5960Fax: 7 (3272) 58-5961

Astana Hotel Okan InterContinental Astana7th floor, office 711Abai Street, 113 Astana, 010000Tel.: 7 (3172) 58-0400Fax: 7 (3172) 58-0410

AtyrauSatpaev Street, 19Office 305Atyrau, 060011Tel.: 7 (3122) 99-6099Fax: 7 (3122) 99-6097

UkraineKyivKhreshchatyk Street, 19A Kyiv, 01001Tel.: 380 (44) 490-3000Fax: 380 (44) 490-3030

UzbekistanTashkentInconel Business Center 3rd floor Pushkin Street, 75 Tashkent, 700000Tel.: 998 (71) 120-6482Fax: 998 (71) 120-6483

The Russian Automotive Market - s3. · PDF fileEmmanuel Quidet Partner ... GNI per Capita...

Documents

Transcript of The Russian Automotive Market - s3. · PDF fileEmmanuel Quidet Partner ... GNI per Capita...