Asahi Shimbun (Vladivostok) - Vladivostok, long a bustling market for used Japanese vehicles, is about to morph into a production center for new Japanese automobiles.
The Russian government is encouraging foreign automakers to form partnerships with local companies as part of a strategy to develop its own manufacturing industry.
It wants to lessen its economic dependence on natural resources and develop the Far Eastern and Siberian regions.
Toyota Motor Corp. has tied up with Moscow-based automaker Sollers. It will assemble the Land Cruiser Prado sport utility vehicle at Sollers' factory in Vladivostok from spring 2012, using parts exported from Japan. Its annual output target is 25,000 units.
Isuzu Motors Ltd., which has a joint venture factory with Sollers in western Russia that produces small trucks, will relocate the plant to Vladivostok. The factory will produce 5,000 units a year from as early as fiscal 2012.
Mazda Motor Corp. plans to begin vehicle production in the Russian Far East.
Tariffs will be reduced, and fares on the Trans-Siberian Railway are expected to be discounted when Japanese companies transport vehicles to Moscow and other cities in western Russia.
It is also more efficient for Japanese companies to send parts and components to the Russian Far East, which is close to Japan.
It remains unclear whether Russian manufacturers will be able to improve production technologies to the levels expected by the Russian government.
To be eligible for preferential treatment, local factories must introduce detailed processes, such as painting and welding, within 18 to 30 months after the start of operations, in addition to automobile assembly.
The factories are also required to use more local parts. A key question is how to secure suppliers that can manufacture high-quality products.
"Foreign vehicles combine advanced technologies," said Sergey Udalov, executive director of Autostat, a Russian auto market research agency. "The government must provide additional assistance to domestic makers."
Traffic is crowded in Vladivostok, partly because roads are being repaired at many places ahead of the Asia-Pacific Economic Cooperation forum summit meeting next year.
Most vehicles on the road are right-hand drive, used Japanese vehicles.
At Vladivostok's largest open-air sales facility for used automobiles, roughly a 30-minute drive from the city center, about 3,000 second-hand Japanese vehicles were on display recently.
The facility opened around 1993 after the Soviet Union collapsed, and customers came from as far away as Siberia.
Used Japanese vehicles were considered more reliable than Russian products, despite high mileage in many instances.
Even so, the number of vehicles on display at the facility has fallen sharply from more than 10,000 units after the Russian government raised tariffs on foreign vehicles two years ago to protect domestic automakers.
Higher tariffs dealt a serious blow to Vladivostok's flourishing market of used Japanese vehicles.
Tariffs for vehicles assembled within five years were raised by 5-10 percentage points from the previous 25 percent, although they differ depending on engine displacement and year of production.
The number of used Japanese vehicles exported to Russia shrank to 53,180 units in 2009, or less than one-10th of 563,369 units the previous year, according to the Japan Used Motor Vehicle Exporters Association.
But the figure rebounded to 105,478 units in 2010. The same year, Japan exported 86,625 used vehicles to the United Arab Emirates, 79,430 to Chile, 68,952 to New Zealand and 66,575 to South Africa, according to association statistics.
Many people work in jobs related to used Japanese vehicles in and around Vladivostok, from purchasing and sales to parts supply and maintenance.
"For people in the Far East, used Japanese vehicles have become an integral part of their lives," a local newspaper reporter said.
The Russian government is trying to promote domestic manufacturers in other industries, such as pharmaceuticals, medical equipment, commercial aircraft and energy-saving lighting equipment.
Russia is refocusing on manufacturing following a plunge in oil prices since the 2008 financial crisis. Russia's economy is dependent on oil and gas exports.
President Dmitry Medvedev has begun introducing structural reforms aimed at beefing up manufacturing by improving communications infrastructure and promoting information technology industries.
Wide economic gaps remain between western Russia and the Russian Far East.
The government has started development of its Far Eastern region, taking advantage of its proximity to China and Southeast Asia.
It is extending pipelines and improving roads and other transportation facilities to increase oil and gas exports.
