Western Automakers looking for better car component suppliers in Russia

The auto industry is beset with various problems -- if it’s not about overproduction, lack of funds, then it would be union problems, and if it’s not about the workers then there’s always the problems on late arrival of parts and the list goes on.

And just recently a lot of the Western automakers have to stop or slow down production due to the delay in the shipment of parts that got stuck in customs. And one of these automakers is Ford that ran short on components and was forced to scale back production of cars at its plant near St. Petersburg.

According to the head of the Western supplier’s Russian operations, "We were certainly not happy, that's for sure. There have been a number of problems with customs clearance." He also requested that his name as well as his company’s name be withheld in the fear of antagonizing the authorities.

The problem that Ford experience with the spare-parts shipment is also experience by other car plants across the country and is said to be getting worst. It can be remembered that foreign carmakers rushed to build plants after the government announced two years ago that it is rolling out the red carpet. But now after the multimillion-dollar announcements have been made and the fanfare has died down, the giant automakers are becoming aware that there are shortage of quality auto components that they need for the assembly of their Camrys, Logans, and Passats.

To obtain their needed parts most carmakers are bringing in components via the rail, road, and sea from abroad. This is despite the fact that they have the obligation to source more components locally in the near future. Most of the foreign parts makers are just starting to open shop which means that they cannot provide yet the required volume of component parts that various automakers require for their productions on the other hand Russian-produced components are not quality enough to pass assembly requirements according to industry executives.

The local car industry is handicapped by the quality of local suppliers who according to Carl Hahn-- Chairman emeritus of Volkswagen-- are far below world standards. Hahn was given the tasked of helping Volkswagen enter Russia.

Volkswagen has recently chosen a site near Moscow for the construction of its future Volkswagen plant where both Skoda and Volkswagen models are to be assembled and that area is the Kaluga---which is about 120 kilometers south of Moscow where most of the suppliers are. Unfortunately, even in Moscow there are not enough suppliers to supply and create the auto components like VW mufflers that the automaker needs for its vehicles.

The automakers that have taken their production to Russia includes Ford Motor, Renault, Kia Motors, Volkswagen, General Motors, Toyota, and Nissan but only the last four automakers have announced their plans of building plants in Russia. It is no secret that sales in Western markets is not only saturated but stagnating, which leaves carmakers to take their chance on Russia where nearly any foreign car sells well.

Last year, Ford Focus garnered Russia’s best-selling foreign model an honor that Ford has never achieve in its own home market. GM’s Chevrolet Niva that was built in partnership with AvtoVAZ was proclaimed the second-best selling vehicle according to the Association of European Businesses in Russia.

Most of you must be thinking why did automakers choose Russia as their new production haven? Russia is an ideal country to produce cars since the government has scrapped tariffs on key car components to encourage carmakers to assemble their vehicles here. All the government is asking is from the carmakers in return for the favor they have given is to gradually increase the proportion of domestically produced parts that they use to 30 percent within 4 ½ years.

There are already nine foreign and domestic carmakers that have agreed to the said arrangement. They will invest more than $2.2 billion to produce more than 700,000 vehicles per year that is basing on the figures provided by the Industry and Energy Ministry.

About the Author:
Benjamin Hudson works as a supervisor at one of the top engineering firms in the business district of Louisiana. He is also a freelance journalist and has passion for anything automotive.