Speaking to TASS news agency at the sidelines of Russia-Africa Economic Forum head of GAZ Group international business development Leonid Dolgov covered such topics as GAZ Group's prospects in the African auto market, establishment of a manufacturing base in Africa and adaptation of motor vehicles to conditions specific to each individual region.
— Falling sales has been an ongoing trend in the Russian LCV market. Do you think about selling more abroad to compensate for the flagging demand in the home market?
— Today, we operate in 40 countries worldwide and will gradually expand our geography. We have a good product. Our customers abroad like our NEXT lineup. Our priorities are price competitiveness and high-quality service. We focus constantly on aftersales. When we establish our presence in a new country, the first motor vehicles are always shipped with a supply of spare parts for warranty service. And it goes without saying that we carefully select potential partners when we expand to a new market.
— Which are GAZ Group's top priority countries?
— The company had identified three macro-regions- Africa&Middle East, Latin America and Eurasia. Eight top-priority markets were further selected including Egypt, Morocco, Vietnam, the Philippines, Thailand and Indonesia. What makes the latter interesting is that it is the world's fourth most populous country while its automotive business model is build around the concept of assembling global brand. So we can fit in.
— Let's look at individual regions. You've mentioned Latin America. In which Latin American countries do you operate and what have you achieved?
— Let's take Bolivia, for example. Our sales have been growing there and now our share of the local market has reached 13%. Those 13% is what we achieved in the commercial market without any public tenders. The country has a population of 11 million people. It's not a big market but the economy is growing. We expanded into the Bolivian market with the help of a strong business partner, Bolivian Automotors, that sells 13 brands.
— And what about European countries?
— Turkey is the country that comes to mind first. It has become like a home market for us and we have a subsidiary, GAZ Turkey, operating there. Our share in that market is still modest and we have a long way to go. However, the trend has been encouraging as during the first half of 2019 we sold more motor vehicles there than during entire 2018. The recognition of GAZelle NEXT vehicles in Turkey has improved and people grew to trust them. It must be noted that competion in the Turkish market is very tough.
You see all the European brands there and none of them will just give up
GAZ Group has a five-year strategy according to which our share in the Turkish market must grow many-fold.
— Which GAZ Group vehicles are most popular abroad?
— It depends on the region. Low-cost trucks and buses as well as AWD vehicles enjoy the highest demand in Africa. However, the NEXT lineup is the only one we sell to Europe and South-Eastern Asia. Our wide product lineup gives us a head start. We build vehicles of various classes - light commercial vehicles, trucks and buses. We offer both low-cost and easy-to-maintain vehicles running on low-quality diesel fuel with a high sulfur content, and Euro-5 vehicles. We will also offer Euro-6 versions from the next year.
— How do you adapt your vehicles for local markets?
— The pilot operation of our AWD vehicles in Latin America, particularly in Peru and Panama, appeared to be a valuable experience. Our customers used our vehicles as hard as they could - through heavy terrains, dusty quarries and river fords. Such extreme operation let us make a better and more reliable serial product. We introduced 37 improvements to enhance the AC efficience, protect suspension parts from oil leakage, increase the tightness of the passenger compartment and the quality of consumables, filters and brake pads. We reinforced body parts to prevent any cracks from resonant vibrations.
We introduced a highland configuration after the pilot operation in Bolivia. Now our GAZelle vehicles may be operated in the mountains at an altitude of 4 thous. meters above the sea level.
We prove by deed that GAZ vehicles are designed for operation at heavy terrains.
— Can Africa become a new driwer of the world economy?
— Definitely, Africa, together with South-Eastern Asia, will become one of the economy drivers. The outlooks of this region have not been unleashed zet. We think of Africa as a region of great business development opportunities. We believe that our products are better fit for this continent than those of our many global competitors. GAZ vehicles have a frame design that makes them fit for operation on poor-quality roads. We made our products fit for operation in hot climate, improved engine cooling and protection from wear caused by airborne dust and are ready to offer the best transportation solutions for Africa.
— Do you plan to set up a contract manufacturing facility in Africa? Do you consider the Russian industrial zone of Egypt for this purpose?
— We are successfully working with Egypt, where our vehicles have been valued ever since the Soviet epoche. Egypt is on the rise, and we are confident about the outlooks of this market and about our local partner. We are closely following the Russian industrial zone project and participate in elaboration thereof at the cross-governmental level. We will make a decision whether or not to become part thereof based on the economic conditions and the availability of incentives (namely tax preferences) which will attract investments into this zone.
— Does GAZ Group show any interest for the automobile market of Morocco? Do you consider setting up a contract manufacturing facility in this country?
— This is a new market for our company, and we are actively promoting our vehicles there. Auto Hall Group as our partner in Morocco has about 30 outlets across the country and is present in each province. We started with the sales of GAZelle Next drop-side trucks. Now we are looking forward to obtaining certificates for the vans, and later on - for the minibus, Vector NEXT bus and GAZon Next truck. Marocco is a most stable and developed countries of the African continent distinguished by European approaches to public administration, a well-developed banking system, and strong local non-automotive companies. Morocco has free trade agreements with lots of African states. A Moroccan product with a 40% localization level can be exported customs free to most countries in Africa.
In the future Morocco can become a production hub to assemble GAZ Group vehicles and sell them to the neighbouring countries
But before investing in production facilities we need to arrange a sales system.
— Are you planning to ship your products to other African states?
— We are planning to promote GAZ Group buses to boost their sales in Nigeria, Ethiopia, the Democratic Republic of the Congo, and Ghana. We also have a dealer in Madagascar since 2016. Las week our partner took part in a local motor show. While at the end of May President of Madagascar Andry Rajoelina met with Andrey Sofonov, head of Gorky Automobile Plant, and we expect to have further communication with Madagascar at the Summit in Sochi.
— At the domestic market GAZ Group is moving from vehicle deliveries to comprehensive solutions: life cycle contracts, building service stations near their customer facilities, improving transport infrastructure. Are there any similar plans for Africa?
— GAZ Group has an extended range of vehicles with over 850 modifications and superstructures, and we can be a single partner for infrastructure projects. If the government of this or that country wants quality improvements in their transport system we are ready to develop tailored solutions for integrated development of the public transportation system in cooperation with the local Ministry of Transport and our local partners. The same goes for ambulances, school buses and municipal vehicles. We are also ready to assist in arranging servicing for bus fleets. Life cycle contracts are not a regular thing in Africa so far, however everyone has started looking more closely at best European practices. We have it in Moscow and it has proved top be a success. We maintain the availability rate of 97-98 % for the vehicles in Moscow and we can share this experience and expertise with our customers in Africa.
— Does the state support GAZ Group's export projects?
— In the last three years automotive exporters enjoy a partial compensation of their logistics costs from the state. I think that is a very good measure of support for exports.
Our priority markets are at a great distance from Russia. E.g. to ship a LiAZ-type bus to Latin America by sea would cost you some ten thousand euros
This really makes our competitive advantages much weaker. But thanks to state support we are still an active player at overseas markets. We have been working closely with the Russian Export Center and the Ministry of Industry and Trade to jointly develop solutions with which the state could build an effective and efficient interaction with exporters at minimal cost.
— What plans does GAZ Group have for the next few years?
— Our main goal in the international market is to achieve exponential growth. We realize that nobody is waiting for us to come and we have no illusions in that regard. But we have good products and efficient processes, we become increasingly more experienced in selling these products in open competitive markets and we know what it means to be a useful infrastructural partner. A lot has been done over the last three years to strengthen the position of our products in export markets and we are on our way to becoming a global company. Today, we think that a lot can be gained by establishing assembly operations abroad. All attractive markets are protected to some degree by import duties and every one wants to have production in the country. That is why we consider all available options and are fully willing to be adaptive and competitive.
Interviewer Natalia Miroshnichenko
Source: TASS Russian News Agency