US automaker Ford Motor Co’s Russian unit is considering expanding exports as weak sales in its home market look set to continue for another year at least, its chief executive officer told reporters.
Russia’s auto industry is a major casualty of the economic crisis precipitated by the collapse in global crude prices and Western sanctions over the Ukraine conflict.
Auto sales in Russia are down more 30 percent year-on-year in the first 10 months of this year as consumer purchasing power has been eroded and business activity contracted.
That has prompted local automakers to eye exports in a bid to minimize losses, while Ford’s rival General Motors Co quit Russia.
“Export is something we’re looking at,” Ford Sollers chief executive officer Mark Ovenden said. “I’d like to look at it beyond a few thousand [vehicles] ... and see whether there is a more strategic export opportunity for us.”
Ford Sollers already exports to other former Soviet-bloc nations such as Kazakhstan in small volumes, but the company could also target markets in Eastern Europe and beyond, Ovenden said.
Ford has a presence in Eastern Europe with a factory in Romania but it does not produce all of the models there that it produces in Russia, where it makes the Fiesta, Focus, EcoSport and Transit, among others.
It is considering all of its model types for exports as well as engines made at a US$275 million powertrain plant it launched in the Russian republic of Tatarstan this year.
Ford sold about 30,500 vehicles in Russia in the first 10 months of the year, roughly 40 percent less than in the same period last year, according to data from the Association of European Businesses lobby group.
It can produce as many as 350,000 vehicles per year in Russia and hence has considerable potential to ramp up exports.
Ovenden said he expected total Russian auto sales this year of about 1.5 to 1.6 million units and the same amount next year, well below the 2.5 million units sold last year and the 3.5 million Russian automakers are capable of producing per year.
“The challenge everyone will face is that when domestic demand is volatile, how do you continue to fill the capacity?” he said in an interview. “That’s where I think you need to develop the export capability.”
Russia-based automakers exported about 80,000 units in the first 10 months of the year, according to customs data, a comparatively small amount.
Exports to traditional markets in the former Soviet Union are sharply lower as their economies are in the doldrums too.
While several producers including Volkswagen AG and Nissan Motor Co have said they could ramp up exports from Russia, they are yet to announce final decisions.
Russia-based automakers would need continued government support for these plans to come to fruition, Ovenden said, adding that this could take the form of freight support or duty repayments for imported parts that have become more expensive due to the weaker ruble.
The Russian government has said it could provide support measures worth abound 50 billion rubles (US$720.99 million) for automakers next year, according to recent comments by Russian Deputy Prime Minister Arkady Dvorkovich.
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