"You can't sell a Fret with a bad mood"
By the end of this year, AvtoVAZ's sales may amount to about 350 thousand cars, said Maxim Sokolov, president of the company, in an interview with Izvestia at the St. Petersburg International Economic Forum (SPIEF). Much, according to him, will depend on exports, and he will depend on the exchange rate of a strong ruble. In addition to the traditional markets of the CIS countries, the company is also focused on new ones — the countries of the Middle East, Southeast Asia, Africa, and Latin America. Dealerships have already been opened in the UAE, deliveries to Yemen and Oman have begun, and the Vietnamese market is being studied.
"The future of AvtoVAZ is Lada Azimut"
— Maxim Yurievich, you presented a broad program at the last SPIEF. The highlight was the new Lada Azimut crossover. This year you showed updated versions of a number of cars. Among them, the Niva Legend and new sports cars are Lada Iskra and Lada Vesta. What is the reason for this choice? And will it be possible to see these machines in widespread production?
— It is pleasant that our cars are presented at the stands of many companies, organizations and subjects. The Lada Iskra, which has been manufactured at a factory in St. Petersburg since last year, is on display at the Roscongress stand. Lada Aura, which resembles the Maybach color scheme, is on display at the Roscongress stand. Well, our outdoor exhibition is based on the fact that this year is an anniversary in the history of AvtoVAZ. We are celebrating 60 years since the decision was made to build a world-class auto giant in Tolyatti. And that's why the first model is aimed at our history. This is the VAZ-2101, popularly known as the "unit" or "penny". One of the first vehicles produced by the conveyor method. And, as you correctly said, Lada Niva.
Moreover, next year, the Niva will step over the 50-year milestone of production on the assembly line and will stand alongside such historical models as the Volkswagen Beetle and the Mercedes Volkswagen. Niva will be one of them, those that were produced and are still being produced on the assembly line. And for this date, for this anniversary event, we have prepared a gift for all field lovers. Starting from July 20, we will install a new 1.8 hp engine on the Niva Legend model, a more powerful, more economical, ergonomic engine, which even resembles diesel engines in its characteristics. The novelty is not only related to the engine — there will be a different steering wheel, unified with our other model range, and a different electronic architecture, an airbag, new brakes — there will be a lot of new products.
I am sure that Niva's assembly line life will surely cross this 50-year milestone and will last for a very long time. This is today's. And the future of AvtoVAZ is, of course, Lada Azimut, which will enter industrial assembly line production literally next quarter. Sales will begin in the fourth quarter of this year.
And what you saw at the Vinograd site of the St. Petersburg Forum were racing cars. This is also our pride. And one of the racing cars, innovations, that the company has not yet had in its lineup is a racing car based on Lada Iskra.
We have an idea, which we are actively working on in our automobile sports federation, is to organize the Iskra monocup on models of cars of the same name, because, as a rule, circuit races, and not only circuit and rally races, are competitions for automakers, that is, factories, and professional pilots.. Therefore, we suggest that all pilots race only one model produced by AvtoVAZ— the Lada Iskra. Then their professional skills will be fully tested. Maybe next year we will see such a monocup. And models such as the Lada Iskra and the sporty Lada Vesta, which now races in many disciplines. They are also represented here at the St. Petersburg Forum. AvtoVAZ, as always, wants to surprise and please its customers and connoisseurs.
— And what will surprise you in the future? What new models are being developed?
— Our main task is not so much to surprise, as to meet the expectations of the market, the expectations of our customers. We are a responsible, customer-oriented company. And the fact that we are launching the Lada Azimut project with a new line of engines, more powerful, with a volume of 1.6, 1.8, and a capacity of 122 and 135 hp, respectively, and we will install these engines on our other Lada Vesta model range, speaks precisely about our response to customer requests.
If we talk about promising power plants, it is worth mentioning hybrid and turbocharged engines, which I hope can be installed on our flagship cars in the near future. First of all, on Lada Azimut. And we are ready to show such a prototype by the end of this year. As for the car with a turbocharged engine, not a hybrid one, it is already being tested, and based on their results, a decision will be made on its serial launch.
— And these engines are of domestic production?
— The engines are not fully domestic production, partner production. Nevertheless, this is only the first step, and the issue of localization is a matter of volume. And if they are sufficient, of course, we will focus our partners on localization. This is fully consistent with government policy. AvtoVAZ has the highest level of product localization.
"How much is that?"
— If we are not talking about the evaluation of the component base, but about the quantity or share of the component base produced in our country, then in any case it is above 90%. On models such as Niva or Granta, 99.5% or 99.8% of the components are manufactured in the Russian Federation. Well, on more modern models like Lada Iskra or Azimut, this bar is above 90% and even sometimes 95%, depending on the type of gearbox.
— Who are you partnering with to produce powertrains? Are these Chinese manufacturers?
— I will not disclose this, given our status as a sanctioned enterprise, but we are open to the entire market. We still have partner production facilities in other countries, and we plan to open such sites in our CIS countries before the end of the year. We also worked on many cases with our Chinese partners, including the release of sub-brands, such as SKM, which began arriving at our dealerships just on the eve of the forum.
We are talking about minivans, cars that are designed for passenger and freight, cargo and passenger transportation. And our partnership covers not only manufacturers of specific cars or brands, but also the engineering of individual components and assemblies.
"Self—driving cars are not the tomorrow of the global automotive industry, but the near future"
— You recently made a loud statement. A possible development of an unmanned vehicle has been announced. When can they appear on mass roads in our country at all, and what prevents us from producing such cars today?
— It's not exactly true that I announced the development of an unmanned vehicle. It was said verbatim that the elements of unmanned vehicles are already being used to a certain extent, even in the modern model range. And, of course, this is not the tomorrow of the global automotive industry, but the near future. We understand that the trend and the innovations that are coming to the automotive industry, which is a very competitive industry that quickly absorbs all innovations, are precisely related, among other things, to the development of self—driving. Therefore, AvtoVAZ also has a special department in our engineering that deals with these issues, and individual elements, as I said, are being implemented into our cars.
Maybe we'll create prototypes, but it's too early to announce any specific models or projects. After all, we work in those segments, sectors and price groups where the cost of cars today is lower than the cost of self-driving equipment. It costs several million rubles. And we have prices for cars starting, there are even some below 1 million. That is, it is possible to install a drone, but then the car will cost more than twice as much, and it will immediately fall out of the segment it was aimed at. Therefore, as the cost of unmanned equipment and, consequently, the entire infrastructure decreases, we will, of course, prepare our own prototypes and, possibly, serial samples sometime.
— In addition to the cost of production, our regulatory framework is lagging behind, and the infrastructure is not ready for such cars to appear on mass roads at all. Many manufacturers are currently testing self-driving taxis, for example, but they are not yet able to enter mass roads.
— You quite rightly say that this is a complex task, although individual segments or individual types of vehicles in unmanned mode are no longer just being tested, but are also being operated. These are trucks that have been successfully tested, including on the Moscow—St. Petersburg highway. And perhaps this project or this example will be replicated on other public roads in our country in the near future.
"It is premature to say that the demand for our cars specifically for taxi fleets has increased significantly."
— On March 1, the requirements of the legislation on the localization of taxi cars came into force. Have you felt these standards for yourself, and have your deliveries to taxi companies increased?
— It has not been long since the law on taxi localization came into force. Lada previously held a leading position in the taxi segment, especially in the regions, and, in general, retains its position even now. Therefore, it is still premature to say that the demand for our cars has increased significantly specifically for taxi fleets. Nevertheless, we are actively cooperating with the professional community and have even introduced a whole series of taxi cars, specially prepared, cheaper, with a more, let's say, vandal-proof interior, in particular, Lada Aura cars. Previously, the Iskra car was introduced for taxis, the Vesta has been used for a long time, and the Largus, especially in rural areas. That's why we felt confident in this segment before. In the future, we will see what the law enforcement practice will be, but so far it does not limit anyone in their choice.
— According to analytical agencies, AvtoVAZ has slightly reduced its share in the domestic market this year and last year. This year, from about 30% to about 25%. What measures will you take to keep this share of buyers, taking into account the active dumping of Chinese manufacturers? Do you feel this dumping now and what measures are you taking to avoid missing out on a domestic buyer?
— I would not say that our share has decreased this year. On the contrary, it has been gradually increasing since January. Well, in order for the statistics to be representative, we need to look at a longer period. Yes, there are different spikes in the automotive market, and we know that our market has approached the mark of 3 million cars sold a year a couple of times, but today it is 1.3-1.4 million, maximum 1.5 million. And if we take a 10-year or 15-year period, especially during the time of the board of foreign shareholders in the company, then the share of Lada brand products was 15-20% maximum. We are now confidently holding the level of about 25%, that is, it is a quarter of the market. Every fourth new car sold in our country is a Lada brand car. And according to the terminology of our Federal Antimonopoly Service, a quarter of the market is the dominant position in the market, so I would not say that our share is somehow decreasing. Another thing is that we feel, of course, the breath of competition, and this motivates us to present our market, customers, and customers with new modern domestic cars that fully comply with international trends, but at the same time are high-quality, comfortable, and safe.
— Prices play a big role in the competition. Are you planning to increase them or, conversely, restrain them?
— If you focus on the market as a whole, the average price of a new car in the Russian market today is 3.5 million or even slightly higher. As they say, we don't have such cars nearby. As I said before, our prices start from 1 million, even less, and a maximum of 2-2.2 million. That is, in this case, we are even improving these average price statistics. Therefore, we are working in the niche of just the most affordable cars in terms of price — this is our strategy, I would even say, a historical mission.
In terms of price, our product range is the most competitive and affordable among all other cars, including Chinese brands. This is our competitive advantage, from which we proceed and which we will focus on when launching new models and shaping our pricing policy for a new model range.
— The central Bank is slowly but systematically pursuing a policy of lowering the key rate. Do you feel any effect from this for yourself?
— The consensus forecast for the market of analysts and experts suggests that it will be approximately in the parameters of 2025, that is, the market for cars as long-term products is not yet responding very quickly and adequately to the reduction in the key rate, but nevertheless, if it continues to decrease at the same rate, we really hope We hope that these factors will lead to a revival, and the sales volume, as a result of our production, will be significantly higher. And this will have a beneficial effect on our financial model, which has been in the break-even zone, the green zone, for the last four years.
— Do you need government support today? Do you even get it?
— The last time AvtoVAZ received targeted state support, if my memory serves me correctly, was at the turn of 2009-2010. Since then, AvtoVAZ has not received any address, exclusively for the company. Yes, there are general sectoral measures to support demand, they are in many ways even social in nature — there is quite a popular measure to support preferential car loans, discounts that are compensated from the budget of the Russian Federation, but it is more for certain groups of the population. We have not requested and are not requesting support from the government and our board of directors, which is headed by our industry minister Anton Alikhanov.
— And if we talk about the key rate, what would be its comfortable level for your company?
— The global automotive industry is an open market, and, of course, the rate that exists in key automotive markets in the world would be comfortable, and it is significantly lower today than in our country. But we proceed from today's objective reality and work in the conditions that exist today.
"We expect to expand the product line"
— If we talk about the market as a whole, earlier AvtoVAZ said that it is possible to revive it in the second half of the year. What is your forecast for the year and, accordingly, what sales to expect?
— I'll speak carefully: we'll wait and see. The consensus forecast for the market and its parameters for the end of the year is about the same as last year and 3-5% fluctuations are not so significant, but nevertheless, we are positive and in a bad mood, as they say, you can't sell Lada. Therefore, if the rate goes down, it will probably sooner or later affect sales in the market as a whole and sales in our product segments.
— What sales do you expect by the end of the year?
— Within 350 thousand cars: a lot will depend on exports, and it largely depends on the exchange rate of a strong ruble, and it is clear that the stronger the ruble, the less sales in export markets. Everything is interdependent here, so today we are forming a production and sales model at our fingertips, so to speak, in order to ensure the maximum of both.
— What are your main export markets today?
— The main markets, as before, of course, are the CIS, Belarus, and our union state, but at the same time we are focused on the countries of the Middle East, Southeast Asia, Africa, and Latin America. We have opened new dealerships in the United Arab Emirates and started shipping our products to Yemen and Oman. We are looking at the Vietnam market. In general, as they say, we don't sleep, yes, and we turn our heads 180 degrees like an owl, and sometimes 360 degrees like a radar. We are ready to supply, but, again, we are largely limited by the objective factor of a strong ruble.
— Are you considering an extension to any of them? New countries for supplies?
— We expect to expand the line, but I won't name it yet, so as not to jinx it, as they say. But I hope that the geography will be bigger than in 2024-2025.
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