Auto-important: Ukraine sanctions aside, US carmakers eye Russia

Market too huge and important to ignore, say experts.

DETROIT:

Never mind the Ukraine crisis and Washington’s sanctions against Moscow: US automakers say the Russian market is their next big frontier. Russia is simply too large and too important for carmakers to ignore, experts said this week.

“The Russian market is going to be larger than Germany,” said John Branch, a professor at the University Of Michigan Ross School Of Business. Branch said the structure of the Russian auto industry is in flux as the demand for imports increases despite barriers imposed by the Russian government.

But that means that automakers, particularly those with global ambitions, simply cannot afford to ignore the market’s potential there, despite its volatile nature. Branch was speaking at a conference at the University of Michigan focusing on the opportunities and hurdles for US carmakers to sell to and in Russia.

General Motors is already partly involved. It has invested in a joint venture with AvtoVaz, which builds the Lada, Russia’s most popular automotive brand. But the Lada brand is a holdover from the Soviet era and their sales are mostly concentrated in what Branch said were third- and fourth-tier cities and rural areas.

In major cities such as Moscow and St Petersburg, consumers are becoming more brand conscious. They like imported cars and have developed a preference for small sport utility vehicles that can navigate the country’s rugged roads and streets.

GM-AvtoVaz produces the Chevrolet Niva, a mini-SUV popular within Russia end exported to neighboring countries formerly part of the Soviet Union. David Teolis, an economist with General Motors, cautioned that predictions about the growth of the Russian market have to be regarded carefully.

Published in The Express Tribune, April 20^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.