Component firms told to cash in on Russia’s fast-growing auto sector

AUTOMOTIVE component manufacturers from the West Midlands should be looking to move into Russia to take advantage of the opportunities offered by its motor industry, corporate finance advisers have said.

Mark Bond, chairman of Northstar, Catalyst Corporate Finance’s Russian partner firm, said Russia was set to overtake Germany next year to become the largest automotive market in Europe.

Added to this, an explosion in consumer demand in Russia would create a market for three million new cars per annum.

He said that all the major global manufacturers have production facilities in Russia; and changes in legislation would create a huge demand for locally-sourced products and in turn, generate new opportunities for British companies in the industry.

All major automotive manufacturers in Russia have signed new production agreements with the Ministry of Economics meaning that every car produced in the country within the next five to seven years will have to include 50-65% of locally sourced products.

“VW for example, has agreed that it will have 50% of local content by 2017 hence it is vital for UK companies to be looking at how they can tap into the Russia market as soon as possible”, advised Bond.

He said traditional myths about trading with Russia should also not be a barrier to trade.

“The situation on the ground is very different from that often portrayed in the media and doing business in Russia is easier than in any of the other BRICs,” said Bond.

He said one of the best ways West Midlands firms could begin manufacturing in Russia was through a joint venture, either with a Russia company or another Western company already established in the country.

“By taking this option companies can avoid the many layers of bureaucracy and red tape that would be involved in a start up operation,” he said.

“The automotive sector is very important to the Midlands economy and entering into a JV means there is an opportunity to build up a production base locally at a cost that is not outrageous.”

Andy Currie, managing partner at Catalyst, said: “Midlands-based component manufacturers need to recognise this and take advantage of the opportunities available in Russia right now. We are working closely with a number of clients who are looking at the potential in Russia. With global markets remaining challenging this is not a time to be resting on your laurels.”

The market conditions for mid-size British firms in Russia are currently being tested as part of a three day trade mission organised by UK Trade & Investment and the CBI.

Birmingham-based manufacturing software supplier Delcam is one of the firms taking part in the visit, which ends on Thursday.

Trade and Investment Minister Lord Green said: “Russia is our fastest growing major export market and, with 140m consumers looking for quality British products and services, it offers great opportunities for British businesses. Important steps such as Russia’s accession to the World Trade Organisation are making it easier for British firms to do business there.”