'In Five Years, They’ll Trust Our Brand Just Like They Trust Hyundai or KIA'

PHOTO by Iliya Pitalev / RIA Novosti
The president of AvtoVAZ, Russia's major automobile manufacturer, talks about Lada brand strategy and cornering the EU market

Last year was a good year for AvtoVAZ: its losses fell and revenue was on the rise. The Russian car manufacturer is still far away from smooth sailing though – sales on the domestic market are recovering at a slow pace, while exports dropped significantly due to Kazakstan’s utilisation charge, which came into force last year. Lenta.ru talked with the AvtoVAZ CEO, Nicolas Maure, about Lada’s overseas promotional strategy, the modernisation of its 4X4 off road vehicle and the role of women within the company.

Lenta.ru: AvtoVAZ has ambitious plans to boost exports. At the same time, your company hopes not only to retain its domestic market share, but to increase it as well. Are you concerned about potentially falling between two stools?

Maure: Strategically, it’s safer to maintain a balance of our risk on the foreign and domestic markets. In 2016, our domestic sales were almost ten times the volume of our exports. During the soviet era the ratio was two to one, so we need to develop both of these markets. We trust that the Russian market will eventually recover and we will have annual sales of 2.7-2.8 million cars (in 2016 the figure was 1.4 million – Lenta.ru). Russia is a huge country, but the motorisation of the population still lags behind Eastern Europe – 290 cars per thousand citizens in Russia versus 400 cars in the Czech Republic or Poland, for example. The country does not have enough public transit to satisfy the transportation needs of the population due to its sheer scale and geography, especially in remote regions. Almost half of the cars in Russia are over ten years old. This means that there is potential for growth in the sales of passenger cars. I know that Russians are good with cars and know how to fix them, especially the Zhiguli, but that doesn’t make a car immortal – sooner or later it will break down for good. The composition of the Russian market will also evolve naturally, so there will be more SUVs and crossovers.

But when choosing a new car, people are primarily attracted to well-known foreign brands…

For a Russian consumer, purchasing a domestic car, manufactured by Russians in a Russian factory should be extra motivation by itself. Of course, the car has to be high quality too. I often use Romania as an example as I ran Dacia there. In 15 years we managed to bring Dacia up to second spot in the consumer confidence ranking. We were very close to Volkswagen, who were in first. Of course, Lada has a long way to go to get to the top of the list. But I’m sure that we will be able to gain the same confidence in the brand as consumers have in Hyundai and Kia. Of course, we’ll need time to achieve that: about five years to make it to the top five.

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So what are your plans for exports?

As we’ve already mentioned, our exports should grow by 50% in the short term. Naturally, Kazakhstan remains one of our primary markets. I’m sure that we will boost our sales there in 2017 thanks to the local production of almost all of our models. There’s also Belarus, where we are well off the market share that Lada needs to have. We will soon launch the Vesta with the Euro 6 emission standard in Germany. This is an important trial for us: we'll see how consumers and the media from the most demanding European market will treat this car. It’s hard to forecast sales for the longer term due to the new ecological requirements which will come into force in the EU in the early 2020s. It will tough to conform to them with current-generation Lada engines. There are only two options – diesel or hybrid engines. Even after ‘dieselgate,’ diesel cars still have very eco-friendly emissions.

So, if I understand correctly, AvtoVAZ plans on manufacturing Lada cars with diesel and hybrid engines?

We’re looking into ways to meet European emission standards. We haven’t reached a decision yet. I’d also like to note that Euro 7 (Emission Standard) will come into force in 2022-23. The EU market is becoming very strict in terms of its ecological regulations. So to grow sales we will have to expand to other regions, such as the Middle East.

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We had a trial run in Lebanon in 2016, which has proven to be a success as we sold almost a thousand cars. We can build on this success and expand to other regions, like Africa, Central and Latin America.

The joint Russian-Kazakh enterprise BIPEK-Auto has recently launched Lada exports in China. Does AvtoVAZ have plans to increase its presence in China?

First of all, Kazakhstan borders China and has close political ties with the country; there are trade routes connecting China with Europe via Kazakhstan. You shouldn't forget about Kazakh expat community in China either. So it’s natural that a factory located in the border region would ship cars to China – they mostly export the Lada 4X4. Even after customs duties and other costs, this vehicle is still competitive on the Chinese market. The deal with BIPEK-Auto has no restrictions on Lada exports to this country.

Lada 4X4 is currently the most recognized model overseas, and you export more of it than of any other model. Does AvtoVAZ have plans to modernise this off-roader?

The 4X4, created 40 years ago by the Russian engineer Pyotr Prusov, is still a very versatile car. There are only two cars with equal off-road capacity: the Lada 4X4 and the Land Rover Defender. We need to maintain this strong point and modernise it by improving the design of the next generation, which we’re currently working on.

Will the new Lada 4X4 conform to the X-style?

The X-style, introduced by Vesta, is part of the new Lada identity. That’s why a team of designers is currently working on integrating it into the next-gen 4X4. There’s good chance that the renovated model will indeed by designed “around the X.” We want to create the image of a reliable, rugged car, perfect for a real man.

The Lada Vesta and XRAY have come a long way from the classic Zhiguli which is primarily associated with the Lada brand. This is true for both the design and the price. Your company used to produce cars in a price range which had almost no competitors. Are you worried about changing that?

We value and respect the history of AvtoVAZ, which began in 1966. I fell in love with the VAZ-2103 and I plan on buying a vintage car like it. We’d like to not only create continuity across different generations of Lada, but also retain the brand’s presence in the budget market. We still have low-end cars planned as part of our mid-term development strategy.

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So we shouldn’t expect a price hike for AvtoVAZ cars in 2017?

We plan on keeping the minimum price under 400,000 rubles ($7,000).

You mentioned in one of your interviews that “women will save the company.” Could you elaborate on that?

About forty percent of our employees are women. Men, of course, are important, especially in engineering and manufacturing. But even back when I was working at Dacia I realised that women are more precise and careful. So they’re more efficient than men at quality control and accounting. Eighty percent of our accountants are women. Wouldn’t you agree that women are great at family budgeting? The same goes for business. I’ve been surrounded by women all my life – I have three sisters and three daughters.

Interviewed by Alexander Volobuev