Industry Trend Analysis - Autos Investment Round-Up: Producers Preoccupied With Russian Recovery - DEC 2017

BMI View: The Russian recovery continues to preoccupy producers in Emerging Europe with many now ramping up production and introducing new models to establish a strong position as the market recovers.

In BMI's regular round-up of production investments, we track the latest projects from the production side of the industry and analyse regional trends that we see developing. In doing so, we hope to build a picture of any potential hubs that may be developing, as well as company strategy in terms of production bases and export programmes.

Emerging Europe Investment Round-Up
Date Announced Country City/ State/ Region Company Value Brief Description Date Onstream
na = not available. Source: BMI
Jul-17 Russia Nab-erezhnye Chelny KAMAZ / Daimler USD 1.7bn Investment strategy announced through to 2022 for the KAMAZ Daimler joint venture. Includes construction of new cab manufacturing plant by 2019, introduction of new engine model, renovation of its assembly line. 2019
Jul-17 Russia Kaluga PSA Group na Establishing production of an undisclosed van/minibus model 2018
Jul-17 Russia St Petersburg Nissan Motor na Adding a second shift 2017
Jul-17 Russia St Petersburg Hyundai Motor na Upgraded production line and began assembly of new Kia Rio small car Jul-17
Jul-17 Russia Ulyanovsk Isuzu na Establishing production of small buses up to 500 units/year end 2017
Aug-17 Turkey Kocaeli Ford Otosan USD 52.2mn Expanding production of Ford Transit and its Custom and Tourneo variations by 40,000 units/year. Full capacity will reach 330,000 units/year na
Aug-17 Russia Kama KAMAZ na Signed MoU to construct joint venture plant with Turkish firm, Tirsan Kardan, to produce cardan shafts 2022
Aug-17 Turkey Sakarya GAZ Group na Introduced assembly of GAZelle Next van and combi versions 2017
Aug-17 Russia Ulyanovsk UAZ na Upgraded facilities including inaugurating second production line 2017
Sep-17 Czech Republic Holysov Mercedes-Benz na Expansion of body shop to add production of all bodies-in-white for Mercedes-Benz' Neu-Ulm plant na
Sep-17 Ukraine Kolomyia Leoni USD 23.5mn Inaugurated new plant manufacturing wiring systems and electrical harnesses Oct-17
Sep-17 Russia Vladivostok Sollers na Relaunching production of Ssangyong branded vehicles 2018
Sep-17 Russia Ulyanovsk Isuzu na Introducing production of CNG-powered Isuzu NPR82. Will produce 300 units per year 2018
Sep-17 Russia Elabuga Ford Sollers na Adding a second shift at its plant to produce more Kuga and Explorer SUVs and Transit vans Dec-17
Sep-17 Romania Pitesti Novares na Inaugurated new plant manufacturing plastic components Sep-17
Sep-17 Russia Izhevsk AvtoVAZ na Started mass production of Lada Vesta SW and Vesta SW Cross Sep-17
Sep-17 Russia Kirov Pirelli na Rearranged production at its joint venture plant (JV partner: Rostech) to only produce cargo and large tires. Sep-17
Sep-17 Russia Vsevolozhsk Nokian Tires na Expansion of plant complex na
Sep-17 Belarus Zhodino Geely USD 330mn Opening new Chinese-Belarussian joint venture plant known as BelGee will manufacture Geely branded cars (including the Geely Atlas) for the Russian market. Will eventually incorporate engine and component production as well. Capacity: 60,000 vehicle units/year. Q417
Sep-17 Russia nationwide KAMAZ na Signed a supply agreement with Kuka to install robotic tools na
Sep-17 Russia Kaliningrad Avtotor na Began contract assembly of Hyundai HD78 light truck Sep-17
Sep-17 Russia Kaluga Volo Group na Will begin production of automatic gearboxes for trucks end 2017

In BMI's latest investment round-up of the Emerging Europe sub-region, we have identified 22 new investment projects that were either announced or inaugurated in Q317. This represents a big increase compared to the 8 projects identified in Q316. Of the 22 projects announced in Q317, the investment values for 4 of these projects were also made public, adding up to a total of USD2.1bn worth of investment, well above the USD1.6bn announced in Q316.

Across the investment landscape for Q317, we have identified three key trends linking projects across the Emerging Europe region: rising bets of a strong Russian recovery in 2018 and onwards; further development of Turkey as a light commercial vehicle (LCV) production hub; and finally a rising diversity of manufacturers in Belarus.

Russian Recovery Bets Continue

In Q317, Russian producers have continued to ramp up production and renew their product line-ups in anticipation of a recovery in the domestic market. We have previously highlighted that the Russian market is set for a modest recovery ( see 'Tepid Sales Recovery Still On The Cards ' , May 11) and automakers all now appear to be positioning themselves to capitalize on this with Russia accounting for 16 of the 22 investment projects announced in Emerging European this quarter. Both Nissan and Ford Sollers introduced new shifts at their lead plants while PSA Group, Hyundai Motor, Isuzu, Sollers and AvtoVAZ all began or announced plans to begin production of new models or refreshed versions of bestselling models at their Russian facilities.

With domestic sales still considerably lower than past record volumes, overcapacity is still an issue across Russia so most investments have not involved expansions in potential capacity. The one exception is KAMAZ and Daimler's USD1.7bn investment strategy announcement for their pre-existing joint venture. The investment involves construction of a new truck cab manufacturing plant and is a strong show of confidence in the recovery of the Russian and neighbouring Commonwealth of Independent States (CIS) heavy truck markets. Daimler's decision to expand its joint venture operations is also a sign of the company's faith in its Russian partner and the sustainability of the partnership.

Turkey Strengthening Role As LCV Hub

Two investments have also highlighted Turkey's continued importance as an LCV export hub into the European Union and Eastern Europe. After establishing Turkey as its global Ford Transit van hub following the end of Transit production in the UK, Ford Motor is expanding production capacity in Turkey which is largely in line with our long-term view that LCV demand across Europe will continue to rise above previous levels ( see ' LCV Sales Surfing The E-Commerce Tidal Wave In 2015, February 25 2015). Although aimed more at the domestic market and exports to Eastern Europe, GAZ Group's investment in widening the scope of van models it produces in Turkey is also adding to the depth and sophistication of Turkey's LCV manufacturing industry and will also help the Turkish industry capitalize on Russia and Eastern Europe's market recoveries.

Belarus Enhancing Its Competitive Landscape For Producers

The final construction of the USD330mn plant by BelGee a Chinese-Belarusian joint venture manufacturing Geely branded vehicles is also adding to the diversity of the Belarusian autos industry. The arrival of Geely-branded production complements earlier investments by PSA Group in the country in October 2014 and from General Motors Company before that. With a spread of Asian, US and European producers now present in the country, production is set to benefit from a more diverse set of investors which will help develop the physical and human capital of the Belarusian automotive industry, as well as lower the risks of a downturn if one producer decides to cut back on production.