Pillows are not protected from sanctions

Pillows are not protected from sanctions

AvtoVAZ, which came under US sanctions in September 2023, remained a key client of the large Russian airbag manufacturer Joyson Safety System (JSS) in 2023, according to the company’s reporting. JSS sold 3.6 billion rubles worth of pillows to the concern, which is 2.6 times more than a year earlier. At the same time, after the introduction of sanctions, AvtoVAZ again began producing cars without airbags, and in February announced a transition to a “reliable alternative supplier.” According to analysts, if JSS stopped supplying AvtoVAZ and did not find a replacement, it would be difficult for the plant to continue operating.

Joyson Safety Systems Rus at the end of 2023 increased its net profit by 142.6%, to 547.8 million rubles, according to the explanations to its financial statements under RAS. The company, which produces airbags, steering wheels and seat belts at its own plant in Ulyanovsk, is 80% owned by the Chinese Ningbo Joyson Safety Systems. In total, the company sold products worth almost 3.9 billion rubles, of which 93.65% came from AvtoVAZ. Supplies to the concern increased 2.6 times.

From mid-June 2022 until almost the end of August, AvtoVAZ produced cars without airbags (see Kommersant, August 25, 2022). In September 2023, AvtoVAZ came under US sanctions, after which it again had problems with the airbags.

In December of the same year, Avtograd News wrote that AvtoVAZ returned to producing cars without airbags, and on February 7, 2024, the concern announced that from that day on, all modifications of the Lada Vesta will be equipped with airbags, and they will be returned to the Granta in March. AvtoVAZ then explained that it “switched to a reliable alternative supplier of airbags” as part of “overcoming the pressure of the sanctions regime.”

The JSS report states that the company is ready to increase supplies to AvtoVAZ and is also looking for new customers. Kommersant's interlocutors in the car market, including those close to AvtoVAZ, know that in the fall the company had difficulties with JSS. One of them clarified that the company then switched to pillows from China.

Kommersant's sources and Sergei Udalov from Avtostat noted that the process of integrating a new airbag supplier usually takes seven to eight months. However, the head of AvtoVAZ, Maxim Sokolov, assured in February that the transition was “carried out in record time.” “The process, which usually takes at least a year, was completed in just three months,” he explained.

The Telegram channel “Autopotok” wrote on February 18 about the accumulation of Lada Vesta cars in warehouses, citing a source, claiming that the concern was allegedly waiting for certain certificates from the counterparty for shipment to dealers. It was clarified that “there are no stickers or markings on the parts of the new airbags” to avoid the potential risk of sanctions.

JSS shipments to Russian players other than AvtoVAZ were insignificant. The company supplied the most (RUB 175 million) to the former Hyundai plant in St. Petersburg - now Avtozavod AGR. The AGR could not answer whether they continue to work with JSS.

At AvtoVAZ, when asked by Kommersant about the supply of pillows from Joyson Safety Systems Rus, they answered that they work “with several suppliers.” “We make our choice in favor of those partners who best meet our requirements in terms of quality, price and the ability to supply the required volumes,” they added. Kommersant was unable to contact JSS in the Russian Federation.

JSS’s RAS reporting states that the company “regularly purchases components outside the Russian Federation in countries where financial institutions fear secondary sanctions and refuse to make payments.” A Kommersant source in the car market says that the JSS plant was stopped this year.

The loss of AvtoVAZ would significantly affect the activities of JSS, and the company needs to find a player comparable in terms of volume - perhaps not directly the automaker, says automotive analyst Vladimir Bespalov. If they do not work with AvtoVAZ and do not find a replacement for it, he believes, then “it will be difficult to continue their activities.”

Olga Nikitina; Sergey Titov, Ulyanovsk

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