Ford signals further investment in Russia despite sharp market decline
With Russian car sales down nearly 17 percent in early 2016, Ford's local joint venture is considering new investment and targeting exports to offset domestic weakness.
Ford is weighing additional investment in its Russian operations, even as the country’s car market continues to shrink. The company’s joint venture, Ford Sollers, delivered strong first-quarter sales growth in 2016, outpacing an overall market that contracted by nearly 17 percent year-on-year.
The Russian automotive market’s downturn showed little sign of easing in early 2016. Industry figures for January to March put total sales at 319,092 units, down almost a fifth from the previous year. March alone saw a further 10 percent drop after a 13.4 percent fall in February. Despite this, Ford Sollers posted a 93 percent increase in first-quarter deliveries and more than doubled its March sales to over 4,000 vehicles.
Ford’s local performance followed a product push in 2015, when the joint venture began building the Focus, Mondeo, Fiesta, Transit van and Explorer at Russian plants. This broader line-up has helped shield Ford from the worst of the market’s decline, even as the rouble’s weakness and falling consumer demand have weighed on rivals.
Ford's investment plans for Russia
Mark Ovenden, chief executive of Ford Sollers, said the company is preparing for the market’s eventual recovery and is already considering its next investment cycle in Russia. Ford regards its Russian presence as a long-term commitment, despite the current volatility.
In the short term, Ford is looking at expanding exports from its Russian factories to Eastern Europe and other markets. Ovenden pointed to growing demand in Western Europe and a shortage of production capacity there, which could create export opportunities for Russian-built Fords if European growth continues.
Context: Ford's Russian strategy
Ford’s willingness to invest further in Russia comes as other global carmakers reconsider their exposure to the country. The company’s localised production and joint venture with Sollers have allowed it to adapt its line-up and pursue export markets, which may prove crucial if domestic demand remains subdued.
For more on Ford’s regional strategies, seeFord to Assemble Ranger Pickups in Nigeria for West African Market.
