Konka is paving the way to the Moscow region

The DNS store chain plans to rent an LG plant in the Moscow region in order to begin producing Chinese Konka household appliances there in the first quarter of 2024, Kommersant has learned. It will be distributed throughout the retailer’s network. LG has been trying to sell or lease production for the last year due to pressure from the Ministry of Industry and Trade. Experts emphasize that it will be possible to launch production of, for example, televisions within a few months, but in the case of refrigerators and washing machines, the enterprise will have to be completely re-equipped, which will take about a year.

The Russian retailer DNS is in the final stage of negotiations with LG regarding the lease of its facilities for the production of refrigerators, washing machines and televisions in the Moscow region, the founder of Smart Solutions and ex-top manager of Vestel Gusein Imanov told Kommersant. According to him, DNS wants to localize the assembly of electronics in partnership with the Chinese Konka and exclusively sell the brand’s equipment in its network. “The prospects for this Chinese vendor in the Russian market look favorable, since when producing equipment within the country, the cost of logistics is significantly reduced, which also affects the final price tag,” believes Mr. Imanov.

Another Kommersant interlocutor in the household appliances market confirmed DNS’s intentions to rent LG’s production. According to him, the launch of facilities is planned to begin before the end of the first quarter of 2024: “The LG representative office, for objective reasons, cannot load production with its own products, and the equipment should not be idle. This is also due to social obligations to staff and the payment of taxes, which have been significantly reduced due to the shutdown of production.” The preparation of the deal, he believes, was influenced by the risk of its transfer to state management. Kommersant’s sources claimed in the fall that the Ministry of Industry and Trade demanded that LG and Samsung, which had stopped production in the Russian Federation due to hostilities in Ukraine, resume plant operations or sell them to other players (see Kommersant on October 13). The Ministry of Industry and Trade declined to comment; DNS and LG did not respond to Kommersant’s request.

A top manager of a large chain of electronics stores claims that it will take at least a year to fully launch the production of refrigerators and washing machines. “The equipment at the LG plant is designed specifically for this brand; it will have to be completely re-equipped, which will take time,” he clarified. But the production of televisions, Kommersant’s interlocutor clarifies, can be launched in a few months, since “their assembly is not so technologically advanced and does not depend so much on original spare parts.”

Having local production, even leased, is more profitable than importing products into the Russian Federation, since when crossing the border, the distributor is obliged to pay a duty for household appliances, notes Dmitry Shashkin, general director of the Kuppersberg brand. In his opinion, DNS can either work with Konka itself and exclusively sell the brand in its network, or sublease LG’s capacity to any interested companies. “Given the number of DNS stores throughout the country, we can assume that the start of sales of a new brand for the Russian Federation will be successful,” believes Mr. Shashkin.

It is profitable to rent capacity only if the company produces goods at the first price, argues another Kommersant source among electronics suppliers. Konka will have to overpay for contract assembly at LG facilities, which will make it more difficult for the brand to compete with the Chinese Hisense and Haier. The latter has its own production of refrigerators and freezing equipment in Naberezhnye Chelny.

Timofey Kornev