A year after his appointment, AVTOVAZ President Nicolas Maure has every reason to be proud of his first notable successes. Under his leadership, the Togliatti car factory and the LADA brand continue to increase their share of the Russian automotive market, actively expand the product line, increase exports, and improve the products, while remaining affordable for the local market. Mr. Maure talks with BRICS Business Magazine about how it has been possible to achieve such results and in what direction the further development of the enterprise will go.
You have been in Russia for a year now. Could you share your impressions of the country? Where have you already visited, and what are the main differences from France?
Yes, I have already lived and worked in Russia for more than a year. Mostly in Togliatti and Moscow, but I have already managed to visit Magnitogorsk, Samara, Dimitrovgrad, Kazan, and Naberezhnye Chelny. I can say that I’ve begun to acquaint myself with the country. It is very large – this is the main difference from France. There are many different regions, cities, and the nature is so diverse. I cannot yet say that I know Russia very well, but, of course, I would like to know more about it. I like being here. I like working with my Russian colleagues. I’m sure that together we will do a good job.
In Soviet times, the entire country travelled in cars made by the Volga Automobile Plant. Later, there was a big sales decline, and only today does LADA manage to have a market share of about 20 percent. Will you be able to maintain such a market share this year? In general, how do you assess the prospects of the Russian LADA market?
First of all, everyone knows the LADA brand well. AVTOVAZ has been around for almost half a century –
the first car came off the assembly line on April 19, 1970. Renault joined the company as a minority shareholder in 2008, and then increased its share. We started to produce new modern models, Vesta and XRAY. The former ranked fourth among the best-selling cars on the market in 2016, and continues to improve its results. The latter is one of the top 10 in the market. These are very good models, which are competitive compared to foreign brands. Our ambition today is to show Russian consumers that buying a LADA is a good choice.
Indeed, last year, we reached the market share of 20 percent in the passenger cars segment and we intend to retain it in 2017. Of course, we need to take into account that the market is changing and that new segments – crossovers and SUVs – are developing, too. The company needs to adapt to fit into these new trends, and we are working on it. For example, in the second half of this year, we will bring the Vesta SW station wagon and its cross version to the market, which is aimed squarely at the new SUV segment. In the coming years, we will continue to move in this direction to meet market expectations and we will keep coming up with new products.
The automotive manufacturing capacities in Russia are excessive today and cannot be utilized to the fullest by domestic demand alone. Is there a way to increase the utilization of Russian plants through export programs? Which countries are the most promising when it comes to expanding the sales volume of LADA vehicles?
Today, we only work at about 50 percent of the available capacity, and, of course, export is one of the opportunities to increase this figure. Historically and geographically, the main foreign markets for us are still the CIS countries. In particular, this applies to Kazakhstan and Belarus. In Kazakhstan, we increased the volume of local manufacturing of automobiles. Last year, the assembly of the entire product line was launched there, and now consumers in Kazakhstan have a full choice of our models, including Vesta and XRAY. We would also like to increase our presence in Belarus. Other CIS countries are also being looked at.
As for exports to European markets, LADA is represented there in seven countries. We launched Vesta sales in Germany. This model has good potential, at least from a technological standpoint. It is important for us to demonstrate that Vesta can meet the expectations of a very demanding German market. Of course, we do not expect significant sales volumes. But, for us, it is very important to progress when it comes to the consumer appeal of our cars. If German customers are satisfied with Vesta, then Russian customers will be satisfied, too.
Apart from Europe, we are working on the possibility of exporting to Africa, Latin America, and the Middle East. We plan to launch sales in Cuba. There is a large tourist flow there, and we are considering marketing our cars as a taxi vehicle.
Last year, we exported about 20,000 cars, and in 2017, we plan to increase this figure by 50 percent. Obviously, we also welcome any government support measures aimed at increasing exports.
The Russian authorities consistently pursue a policy of increased localization in Russia. In your opinion, is it necessary to have a 100 percent localized car? Should AVTOVAZ ever completely localize all its models?
There is a certain technical limit to localization – it stands at approximately 90 percent. Some components will become very expensive when localized, in terms of investment. Today, on average, the level of localization of AVTOVAZ products is already more than 70 percent. In 2016, we significantly improved these figures with respect to Vesta and XRAY, and I hope we will be able to reach 80-85 percent. But there is no economic sense to go above this level. It’s also important to remember that we are part of the Renault-Nissan Alliance. Thus, we purchase some parts from abroad. They are the same for the common platforms of Renault and Nissan, and they are very competitive in terms of cost, since they are purchased at large volumes.
In general, AVTOVAZ‘s industrial strategy is a high level of localization in Russia. Thus, we level out external risks, which is very important. Localization is not part of a short-term strategy; it is long-term work that provides neutrality in relation to currency risks and will also help develop local suppliers.
Renault produces a number of components in Russia and sends them for export. Is it possible for LADA to make a product for the alliance’s vehicles and sell it abroad?
Indeed, when we talk about exports, it means not only cars but also components that we already supply to the Renault-Nissan Alliance (for example, engine components and cast billets). This is how the vertical integration of production is built in Togliatti. That is, we bring to the table those of our technologies which the alliance does not have. We also manufacture bodies for the Logan model, which is supplied to Algeria. The volume of this business is growing, and this program will cover other countries. More technologies will be involved, and operations in these areas will grow. Thus, we encourage partners to supply components for the production of Renault-Nissan. This is a common industrial strategy that we are conducting with our suppliers and alliance partners.
AVTOVAZ has had to resort to layoffs to increase efficiency. Does this create unnecessary pressure on the social situation in Togliatti? Is something being done to provide employment for the employees who are being dismissed?
Today, the enterprises of AVTOVAZ group employ about 48,000 people, most of who work in Togliatti. The shareholders, the company, and I are personally involved in all discussions about social issues. Togliatti is no longer a monotown, but AVTOVAZ, in fact, remains a very important employer for the city and the whole region, especially if we take into account all the suppliers and subcontractors that work with our company.
We try to work in this area in a flexible way, so that, on the one hand, AVTOVAZ can retain its competitiveness, and, on the other hand, people can have jobs – both at the main production facility and at the suppliers’ enterprises. Since February this year, we have created a new division in the company, the Industrial Park. Its goal is to attract new suppliers and new companies to Togliatti that can hire employees not involved in our main production and retrain them. We are confident that within the next two years, we will be able to find work for everyone.
The first product event of 2017 will be the Vesta SW station wagon, including the cross version with a clearance of 205 mm. We are now preparing their production on site in Izhevsk. These cars are not only notable for their very beautiful design but also for having very good technical specifications and drivability. All the feedback that we receive from specialists and from those who test these models nowadays is very positive. Today, these cars do not have many competitors. We can say that this will be a unique LADA product.
There will be some new products in 2018, which I cannot speak about today. In the longer term, we are thinking about new models. We are very proud of our LADA 4×4, which still sells very well, not only in Russia but also in some export markets after 40 years of production. We even produce a limited anniversary series of this car, which will appear on the market this year. Now, we are thinking about the kind of car that a new generation of LADA 4×4 could become. Our ambitious goal is to continue moving along the same lines as our previous model. In other words, good off-road capabilities and affordability, which is what has made it successful in many countries.
In total, as part of our medium-term development plan, we plan to release 12 new LADA models and conduct 11 facelifts in the next 10 years.
