Automakers to continue investments in Russia image

Top executives seem intent on following a risky scenario – continue to invest in localized production in Russia even as the political turmoil sees relations between the country and western nations falling apart.

Automakers say the best – and maybe safest – course of action is to continue to invest locally even as new sanctions are enacted because of Russia’s involvement in the Ukrainian crisis. The main reasons are simple. First and foremost, executives hope the bridge between the West and Russia can be reconstructed in a few short years. Then there’s the decline of the Russian ruble and the possibility to have higher Russian import tariffs – both serious causes to increase local production.

“I do think that in the medium term, this thing will settle and we will come back to some level of normality, ” comments Sergio Marchionne, FCA’s CEO. “The only reason that I say that is that the alternatives are relatively ugly, not just for Europe, but in general.”

“Selling imported cars is quasi-impossible” in Russia. “The only thing you can do is localize, localize, localize, just to get out of the trap of the exchange rate created as a consequence of the political events,” adds Carlos Ghosn, CEO of the Renault Nissan alliance.

Automakers have been wisely reluctant to give up years of continued investments in a market that was once viewed capable of taking over Germany as Europe’s largest single market. Recent reports also support their cause, saying that import sanctions against import cars would also hurt Russia – loosing important revenue from tax and tariffs.

Via Automotive News Europe