“We know the client’s needs better here”

Sollers is one of the few players in the car market who was able to quickly relaunch the sites, being left without the models of their former partners. The general director of the concern spoke about how this happened Nikolay Sobolev.

— Over the past two years, Sollers has restarted production at factories in Elabuga and Vladivostok. How difficult was this process?

— I would probably talk about restarting the strategy of the Sollers group itself. We have spent many years building our production assets in partnership with global leading automakers and have become experts in rapid product launches, efficient industrialization, and localization. But all this was based on the product strategy of the partners. With the departure of global OEMs, we realized that we could only rely on our own competencies in promoting products to the market, in industrialization and localization, as well as on our own brand and investment resource.

Therefore, we have decided to focus our efforts on the commercial vehicle segment, where we have traditionally been one of the leaders. Here we know the client’s needs better. And most importantly, in the commercial vehicle market the product life cycle is longer, and the efficiency of investments in localization is higher.

Even before the shutdown of our previous joint ventures, we were familiar with potential Chinese technology partners. As a result, we were able to quickly determine what we wanted, identify the best one, and quickly agree on the basic principles of interaction.

We agreed that we could modify the platform and develop our own products on this platform. And most importantly, we will localize to the extent that we consider it effective and appropriate in terms of critical components, assemblies and assemblies.

— Not all market participants were able to restart quickly. What turned out to be most important?

— This, naturally, is knowledge of possible partners and products. But on the other hand, this is the presence of industrial assets and competencies, a potential base of Russian suppliers for localization. And also knowledge of the client and the presence of a strong distribution network, which we have been developing for quite some time. We quickly launched the production of the full cycle of Sollers Atlant and Argo cars and almost simultaneously restarted the engine plant in the Alabuga SEZ. During the year, about 10 thousand cars were produced and sold, this is a very good indicator for starting the project.

— Is there any key difference in working with Chinese partners? For example, many people say that they do not understand the concept of after-sales service.

— When launching the product, we immediately agreed with our partner on what standards the level of service should meet and what support was required from them, including the supply of spare parts. In addition, we immediately financed the creation of a large stock of spare parts in Russia. Thanks to this, we have created a service offer that meets all international standards, and our Chinese partners strongly supported us in this.

— Is there a problem that Chinese automakers are not inclined to integrate Russian factories into their supply chains and guarantee volumes to suppliers for this market?

— Yes, while all localization programs are based on interaction mainly with Russian suppliers, Chinese component manufacturers have not yet come here with their projects. Although our project for the production of security system components will be implemented in the format of a joint venture with a Chinese company that owns the technology.

But in general, the arrival of Chinese suppliers is a matter of time. I am sure they will appear when the volume of local production of Chinese platforms increases, primarily in the passenger car segment.

— Is there any dialogue going on to integrate suppliers – for example, former Magna Johnson Matthey and others – into your chains?

— We rely on the industrial cluster created with the support of Tatarstan, and are now working with our traditional suppliers. As for the suppliers you mentioned, their future will most likely depend on automakers coming to capacity in their respective clusters.

— How profitable is car production in the Russian Federation now compared to pre-crisis levels?

— Profitability strongly depends on the segment in which you play and on economies of scale. In the commercial vehicle segment, profitability is traditionally higher than in the passenger vehicle segment.

We are implementing an investment program aimed at increasing the level of localization and, accordingly, reducing logistics costs and currency risks. We see the potential to reach the level of profitability for new products that we had two years ago in the very near future.

— Is it realistic to resume production at the majority of factories that were operating until February 2022?

— Car production capacities were created in the mid-2010s for the prospects of a market of over 3.5 million cars per year. Now, probably, the most optimistic forecast for the medium term is 2 million, or even less. Naturally, there is an imbalance of capacity and market. And one way or another, an inevitable balancing will occur, because the capacities also cannot be mothballed for long. There will definitely be some loss of capacity – and I think we will see this in a short time.

— Will newer sites be open?

– Maybe. There are modern production assets. But these assets without a product probably don’t have much value. Therefore, what really matters here is what products will appear and who will come.

— Do I understand correctly that there is now quite high competition for the same potential partners?

— This is not the case in the commercial vehicle segment. There are key Russian manufacturers, each with their own strategy, their own market positioning and their own non-overlapping tracks of interaction with Chinese technology partners. And in general, the landscape of industrial players in the commercial vehicle segment looks quite balanced: it allows them to cover demand, but, on the other hand, there is no problem of too high fragmentation of the market.

Interview conducted by Olga Nikitina