Translated from Russian to English - www.onlinedoctranslator.

com

increase in car production at the level of up to 304 million units. By 2020, such
growth rates, taking into account the decline in domestic consumption, coupled with
the constantly growing quality of cars, can ensure the active development and
consolidation of Chinese manufacturers in the US and EU markets.
The latest trends in the development of the global automotive industry
are also relevant for China, where an important place in R&D is given to the
creation of "green" cars based on the use of alternative energy sources. Thus,
the PRC today is already a leader in the production of electric vehicles (so far it
is mostly scooters and scooters). The widespread use of the latter is mainly
due to tough government incentives and the country's struggle to maintain a
favorable environmental situation in the largest metropolitan areas.

Having forms of state regulation, at the same time, they can be widely
used to popularize other environmentally friendly vehicles. So, in a number of
cities in China, subsidy programs for owners of cars with hybrid engines and
electric vehicles are already being introduced as an experiment; programs for
the conversion of public transport to electric traction are widely used.

Manufacturers are responding to these initiatives by creating new

designs, both ready for mass production and at the level of concepts. In this
case, we are no longer talking about borrowing foreign technologies, which
we have repeatedly mentioned earlier. New projects are fundamentally new
and open previously known directions in the development of car designs. For
example, on urban routes you can already meet the BYD eBus-12 bus, which is
driven by special motor-wheels that receive energy from solar panels located
on the roof. Another example is the BYD eBus-12 electric car operating in the
taxi industry with special batteries.

Such tendencies testify to the possibility of China's emergence in the

near future as a leader in the production of the latest technologies in
106
industry, and copying well-known brands and poor quality will become a thing of the past.

Prospects for the development of the automotive industry in China are

assessed from different angles. On the one hand, China's position in the global
automotive industry is expected to strengthen against the backdrop of an
unstable economic situation in the US and EU countries. On the other hand, there
are also pessimistic estimates indicating a possible overheating of the
automotive industry. For Russia, a rational position in relation to the PRC is
becoming important in order to find ways for mutually beneficial cooperation not
only in trade and investment, but in the innovation sphere, based on the wide
production capabilities of this country, on the creation of not only assembly
plants with automobile companies of the PRC, on conducting and integration of
joint research in the automotive industry to improve the quality level of this
industry in Russia.
It can be stated that the automobile industry of the PRC today is at a key
stage in its development, and it would be absolutely wrong to deny the
contribution made by joint ventures to the development of the PRC
automobile market. However, today it is fundamentally important to form our
own strategy for the development of the automotive industry, the potential of
which is very high.
An important aspect in this regard in the near future should be the
formation of our own car brands, which requires large investments. Thus, the
Plan of leading car manufacturers published in 2009 suggests that the volume
of their total investment in their own development of new brands should be at
the level of 5.8 billion dollars,69which is a huge amount compared to the
profits of enterprises. The weight of this amount will increase, taking into
account the fact that part of the annual profit is transferred to its foreign
partner. It should be borne in mind that large automobile companies annually
spend large sums on reforming existing production facilities.

69China Automotive Statistics: [website]. URL: http//www.auto-stats.org.cn

107
 After large payments for brand value and technology transfer, PRC
automobile enterprises (due to their limited capacity) cannot quickly apply and
use new technology. At the same time, the foreign side, as a rule, does not risk
bringing the latest technologies to the PRC. According to experts, if a joint
venture intends to introduce a new model into production, then the cost of
technology transfer can reach 200 million euros. Among other things, it is
necessary to pay remuneration to the management of foreign participants,
buy components (at the same time, their cost may be higher than the cost of
their repair), and spend certain funds on adapting the car to the Chinese
market. In view of these circumstances, the introduction of technology, as a
rule, increases the profit of a foreign manufacturer in the PRC market.

In practice, there is a case when, in the transition from making a profit through the production of a

joint venture to developing its own brand, the Shanghai Automobile Corporation (SAIC) decided to use the

purchase of the company. After the purchase of the South Korean car manufacturer SsangYong, the Chinese

participant has its own plant in South Korea and its own brand. Through the acquisition of British manufacturer

Rover, the company was able to acquire intellectual property patents and two productions. This move was

strategic compared to the usual purchase of rights to use the technology, as it will help transform foreign

resources into domestic ones. Due to the fact that Chinese manufacturers have practically no experience in

international project management, and because of SAIC's longstanding and close ties to Volkswagen and

General Motors, reform is a major challenge for this Chinese company. Compared to SAIC, a large

manufacturer like Dongfeng has declared its own development strategy, but this company lacks the necessary

knowledge and technology. At the same time, they may resort to using the proven technologies of their

partners, but they are inferior to their own national competitors in terms of technology absorption, as well as in

terms of the availability of resources for acquiring foreign but this company lacks the necessary knowledge and

technology. At the same time, they may resort to using the proven technologies of their partners, but they are

inferior to their own national competitors in terms of technology absorption, as well as in terms of the

availability of resources for acquiring foreign but this company lacks the necessary knowledge and technology.

At the same time, they may resort to using the proven technologies of their partners, but they are inferior to

their own national competitors in terms of technology absorption, as well as in terms of the availability of

resources for acquiring foreign

108
companies. In turn, brands such as Chang'an and Hafei have always been
concentrated on light and small cars, so it will take even longer for them to
launch their own brands.
It is also necessary to take into account the trends in the consolidation of
the PRC car market, since under the influence of the market and government
actions, the structure of the PRC automotive industry is evolving from classic
mergers and acquisitions to strategic alliances in the field of production,
resources, R&D, and sales. As a result of the evolution of the market in the PRC, a
highly centralized industry structure has formed, with the five largest automobile
companies accounting for about 70% of the market. As competition increases,
the market share of these enterprises will also continue to grow, while they will
seek to develop various forms of cooperation and organization of joint ventures
with leading automotive TNCs.70As competition intensifies in the market, a third
wave of mergers, acquisitions and reorganizations is coming. The government
generally supports mergers and acquisitions, which are carried out by
enterprises whose market share is high. The specificity of this wave of mergers
and acquisitions is that they are not related to streamlining the situation in the
industry and the growth of the scale of enterprises, but are aimed at creating
such corporations in the PRC economy that could compete in the world market
with leading automotive TNCs.
It should be noted that the PRC has already demonstrated its
importance in the world markets for consumer goods, and an increasing share
of the world market is being won by Chinese electronics, so the PRC’s plans to
implement the “Long March” in the automotive industry are quite justified,
even despite the fact that cars are complex goods and, accordingly, objects of
international trade. Nevertheless, South Korea's fifteen years of successful
experience in developing the national market and exporting cars allows us to
estimate that the PRC will pass this path even faster.

Lee Xiangong. Trends and prospects for the development of the passenger car industry in China: Diss. cand. economy Sciences,
70

08.00.14. - M.: RUDN, 2010. p.34

109
 Leading analysts note the high potential of the car market in China due
to its low motorization, which is only 58 cars per 1 thousand inhabitants, while
in developed countries the average car supply is about 400 cars, in particular,
in the USA - 797, Japan - 581, Germany - 572 (see fig.

China =1 58
India □18
Mexico
Russia “=| 275 - - - - - - 1M
Great Britain “=1271 Q - - - one

Italy - - - - - - - - - fifteen
A7Q
France
580
Germany - - - - - - - - - - - - - - one
72
Japan - - - - - - - - - - - - - - one
591
USA
797
- - - - - - - - - - - - - - - - 1-------------- 1 --------------1 10
00

Rice. 9. Motorization of some countries of the world in 2009-2013 (average

indicator, number of cars per 1000 inhabitants)
Source: compiled by the author from: Motor vehicles (per 1,000people) [Electronic resource]. - The
World Bank, 2014. - Access mode:
http://data.worldbank.org/indicator/IS.VEH.NVEH.P3

At the same time, it should be noted that over the past five years alone,
the car park of the PRC has grown from 50 to 120 million vehicles, i.e. there is
a high growth rate of this indicator, but it also lags significantly behind the
United States, where this figure is 200 million cars.71Thus, there is a high
growth potential for the PRC car market.
Given this potential, the desire of a number of foreign automotive multinationals

to increase their presence in the PRC is understandable, in particular, the commodity

structure of production is diversifying and many companies, for example, Honda Motor,

Mitsubishi, are beginning to focus on the PRC in the production of small cars.

China's car fleet has grown to 240 million vehicles [Electronic resource]. - The magazine "Behind the wheel", 02/11/2013. - Access
71

mode:http://www.zr.ru/content/news/514793-avtopark kitaja vyros do 240 mln avtomobilej/

110
cars.
It is noteworthy that literally ten years ago, experts pointed to the
possible takeover of the Chinese automotive industry by the largest Japanese
and European multinationals. However, today, despite the presence of many
joint assembly plants, China is developing its own production, and part of it is
already being exported. In recent years, the growth rate of the automotive
industry has outpaced the growth rate of GDP and all other sectors of the
economy.
However, the development strategy of the automotive industry should be
based on the full-scale development of international economic cooperation,
which will accelerate the integration of the industry into the global automotive
industry. Leading automotive multinationals both assemble their vehicles in
Chinese factories and occupy an important position in the automotive
components market. With the liberalization of the system for marketing Chinese
automotive products in the world market, the competitiveness of TNCs in the
domestic market of China will gradually increase; cooperation between Chinese
foreign partners will tend to deepen. At the same time, the forms of cooperation
will become more and more liberal. Obviously, the international cooperation of
national manufacturers of China will make their development more stable and
predictable.
Independent foreign estimates suggest that China's automotive industry
lags behind the world level by no more than ten years, but it must be taken
into account that the potential of the automotive industry in China is very high
and it is capable of producing a greater number of new car models, the
relative level of Chinese car designers while low. The realization of this
potential is possible on the basis of the development of cooperation with such
auto giants as General Motors, Toyota, Volkswagen, Ford, Daimler, Renault.
Given that the level of domestic and international specialization of China's key
manufacturers, such as FAW and SAIC, continues to grow, their lag behind the
brands of these corporations from the international level is shrinking. Number
of enterprises by
111
the production of automotive components is also increasing; their potential
grows, i.e. they increasingly meet the requirements of the world market. As a
result of the latter, the Chinese car market is increasingly export-oriented.
The main work of the national companies of the PRC in the near future
should be aimed at processing foreign brands, taking into account the needs
of the domestic market. In this sense, the Chinese automobile industry has
acquired certain skills to improve a number of brands, which makes it possible
to involve national manufacturers in the design of new cars. In the field of
components manufacturing, China's manufacturers have good prospects for
R&D of key equipment, but the level of these developments is still inferior to
the world.

3.3. Problems and opportunities for the development of the automotive industry

of the Russian Federation on the basis of foreign experience and international cooperation

with China

Over the past two decades, complex transformational processes have

taken place in the Russian automotive industry. On the one hand, it was
determined that during this period, the annual sales of passenger cars
increased from 990 thousand to 2500 thousand cars, or 2.5 times.72On the
other hand, there were a number of factors that directly affected the dynamics
of car production in our country. These factors include:
- low level of motorization of the country;
- a high percentage of depreciation of the fleet;

- legislative framework that creates attractive conditions for opening

manufacturers of their own production in the country;

- stimulation of domestic demand for automotive products for

the basis of recycling programs at the regional levels and at the level of the industry

enterprises themselves;

72AstafievaI.A. Organizational and methodological support for the formation of an effective management system for integrated
business structures in the automotive industry in Russia: Abstract of the thesis. diss. cand. economy Sciences, 08.00.05. - M.: MAMI,
2012. P.9.

112
 - measures to support financial stability and investment
activity of profile enterprises on the part of the state;
- organization and implementation of joint credit programs of manufacturers

automotive products and banks, improving credit conditions;

- construction of new assembly plants on the territory of the country and
expansion of the level of localization;73

- an increase in demand for auto components and accessories due to

the expansion of car assembly plants, which contributes to the development
of production capacities of the auto component base in Russia;
- growth of consumer confidence in the reliability of operation and
car maintenance;
- crisis phenomena in the national economy of the Russian Federation, which negatively affected

on the financial stability and investment activity of such large automakers as

Avtovaz, Kamaz, GAZ, Sollers, Avtotor, etc.
Table 18. Structure of the domestic automotive market in the context
origin of cars
Auto category Sales, thousand units Sales, billion USD
mobiles 2010 2011 2012 2013 Change, % 2010 2011 2012 2013 Change, %
Russian cars
560 920 580 487 - 13.1 5.2 6.9 6.7 5.9 13.5
cars
Foreign cars, pro-
610 1040 1205 1310 115.8 12.0 23.7 30.9 34.6 188.3
produced in the Russian Federation

Imported cars
610 840 975 813 33.2 17.4 28.3 33.4 28.5 63.8
cars
Total 1780 2500 2760 2610 46.6 34.6 58.9 71 69 99.4
Source: Compiled and calculated from: 1) Overview of the new passenger car market in Russia and forecasts
its development. StanleyRoot, 01/19/2012, p.11
http://www.pwc.ru/en RU/ru/automotive/assets/automotive-review-2011.pdf ; 2) Litvinenko S. Russian
automotive market: results of 2013 and development prospects. - PricewaterhouseCoopers, January 28, 2014 p.5.

Measures taken by the Government of the Russian Federation to support

the industry and attract foreign investment in the domestic automotive industry
in the form of an “industrial assembly regime” have yielded positive results. As a
result, part of the direct import of automotive equipment was replaced by
products manufactured in the Russian Federation. At the same time this

73See, for example: Shushkin M.A. Mechanisms for localizing the production of auto components as a strategic
task for the domestic auto industry // Automotive industry. 2013. No. 1. P.1-3.

113
was not enough for the full development of Russian automotive enterprises.
Moreover, traditional Russian car manufacturers (AvtoVAZ, GAZ, KAMAZ, etc.),
as a result of the industrial assembly regime, found themselves under severe
competitive pressure from foreign car manufacturers that assemble their
products in the Russian Federation.

In this situation, many Russian enterprises have chosen the path of

cooperation with international strategic alliances as the main strategic
alternative for their development. At the same time, foreign partners propose
such strategies for Russian industries that define their role only as assembly
plants for the national market from ready-made kits produced abroad. As a
result, these strategies do not involve the development of their own
technological developments and the construction of production and
innovation networks with suppliers of automotive components.

According to domestic researchers, under these conditions, it is

necessary to use such strategic alternatives for domestic automotive
enterprises, which, on the basis of industrial partnerships with world industry
leaders, are aimed not only at maintaining production capacities and jobs in
the industry, but also at creating long-term competitive advantages.74In this
regard, at present, domestic economic science has to find answers to the
following questions: how to ensure national economic interests when
integrating the production activities of domestic automobile companies with
world industry leaders; how to ensure the transfer of new competitive
technologies to the Russian automotive industry; how to effectively modernize
and create new production of automotive components.

74Shushkin M.A. Development of automotive industry enterprises based on industrial partnership strategies (theory,
methodology, practice): Abstract of the thesis. diss. doc. economy Sciences, 08.00.05. - Penza, 2013. P.4. See also in
more detail: Shushkin, M.A. Formation of strategic alternatives for the development of

114
 The strategy for the development of the automotive industry of the Russian Federation until 2020

contains very ambitious plans for the development of the industry (see Table 17).

Table 19
buildings in Russia
Parameters 2011
2020
Macroeconomic parameters
Share of automotive industry in GDP, % 1.26 2.38
Number of people employed in the automotive industry of the total number of able- 0.6 0.6
bodied population, %
Automotive Market and Production Parameters
The volume of the domestic market of passenger cars, thousand units. 2478.44 3600
The volume of domestic production of passenger cars, thousand units. 1738.16 3150
Fleet parameters
Car park, million units 34.1 52
Provision of cars. units per 1 thousand people 236 363
Source: data of the Ministry of Economic Development of the Russian Federation, the Ministry of Industry and Trade of the Russian Federation, Rosstat, ASM Holding.

It seems that the achievement of the goals set in it is hampered by a number of

problems in the development of the automotive industry in the Russian Federation: the

depreciation of production and technological bases, the lack of modern technologies,

the underdevelopment of in-house engineering, and the insufficient scale of production

to increase the level of localization.

A new challenge for the domestic automotive industry is the entry of

the Russian Federation into the WTO, under which Russia must reduce duties
on the import of foreign cars from 25% to 15% within 7 years (from 2012 to
2019). As a result, according to expert estimates,

adoptions of the automotive industry (questions of methodology). Monograph. - N. Novgorod, 2013. - 214 p.

In 2015, there will be a significant decrease in the share of domestically produced

automotive vehicles in the total volume of sales in the domestic market (from 65
to 40-45%).80Another significant threat to the Russian automotive industry is the
expansion into the market from China and India, the consequence of which will
be the loss of competitive advantage by domestic companies in the form of lower
prices.
Domestic researcher M.A. Shushkin, in order to identify

115
directions for overcoming the technological gap and low competitiveness of
domestic car manufacturers81, in connection with which the aggregated
factors of the system of the automotive industry at the international, national,
market and intraorganizational levels were identified, and their detailing was
carried out.

As a result of the systematization of these factors, the key problem of Russian car

manufacturers was identified, which consists in a low technological level of

development and a lack of investment for the development and implementation of

technological platforms that are competitive compared to foreign analogues. So, for

example, the average number of cars produced on one platform in Russia (27 thousand

units per year) is significantly lower than in the USA (119 thousand units per year) and

China (61 thousand units per year) , as well as from international strategic alliances

(300-700 thousand units per year)

Table 20. Competitiveness of the Russian automotive industry in

comparison with foreign countries
No. The indicator of competitive Indicator value
p.p. news Foreign countries and companies Russia
The volume of car production within China - 18.2 million; Japan - 9.6;
one. 2 million
the country USA - 7.8; Germany - 5.9
Leading TNK (Toyota, The largest Russian
Volume of production at the level
2. Volkswagen, General Motors) - from 3 to manufacturer - Avtovaz - about
of individual corporations (OEM)
8 million units 0.5 million tons.
Use of car platforms Within the framework of a separate TNC, the Only Avtovaz has 4 obsolete
3.
production of the entire line of automobiles platforms; rest
80According to the analytical agency "Avtostat".
81Shushkin
M.A. Development of automotive industry enterprises based on industrial partnership strategies (theory,
methodology, practice): Abstract of the thesis. diss. doc. economy Sciences, 08.00.05. - Penza, 2013.
pp.15-16.
lei is based on 3-6 joint platforms manufacturers - one by one
platform
Average annual vehicle From 60 to 120 thousand pieces. per year (in
4. production per vehicle platform strategic alliances - up to 700 thousand per 27 thousand pieces in year.

year)
Share of research and development
five. ~5% ~1%
costs for companies, %
All-round usage out-Rigid vertical inter-
6. Methods intercorporate
R&D and production sourcing grace within the corporation
technological cooperation
The level of use of outsourcing
7. singa for the production of automotive from 10 to 30%
components from 70 to 90%

116
 one) SKD (semi-knocked down)
- "screwdriver" assembly, when the
company deals only with large a closed production scheme,
Production schemes used by assemblies and parts. 2) CKD when both components and the
companies (complete knocked down) - cars themselves are produced at
eight.

"industrial" assembly, when the the same site

production cycle includes welding
and painting
The duration of the product life
3 to 6 years old from 13 to 30 years old
cycle
nine.

The global financial and economic crisis has had a significant impact on
the automotive industry in our country compared to developed countries. The
main reason for this is that anti-crisis programs in the Russian Federation
were adopted rather late. For example, the program for scrapping old cars,
which contributed to reducing the rate of decline in sales abroad in 2009, was
implemented in our country only in 2010. As a result, in 2009 the Russian
automotive industry slowed down its development, as many domestic
manufacturers unable to adapt to the decline in demand in time. Thus, in the
passenger car market in 2009 there was an annual decline in sales of almost
50% and the volume of sales in the market of new cars amounted to only 1.5
million units.75In addition, during this period, the bias of preferences of
Russian consumers shifted towards Russian car brands, which was associated
with a decrease in household income, as well as a significant increase in
import duties on imported cars.

The problems that emerged in the automotive industry in Russia in

2008-2009 contributed to a change in the conditions of competition both in
production and in car sales. 2010 was a turning point for national companies
that managed to overcome the recession and began to increase their
efficiency. The main factors for the intensive development of the industry were
the country's low level of motorization, its outdated car park, and restrained
demand for cars. The Government of the Russian Federation took measures to
improve the situation in the industry, for example,

75Automotive market in Russia and the CIS. Industry Review/Corporate Report Ernst and Young, 2009.

117
conditions for car loans to consumers have been improved, and a program for the
recycling of old cars has been implemented. Therefore, already in 2010, the demand
for cars in the domestic market began to recover. The post-crisis development of the
car market, which began in 2010, was characterized by the following main trends :

- gradual recovery of lending volumes for the purchase of cars;

mobiles;
- growth of confidence of potential buyers in general economic
conjuncture in the country;

- adoption of a set of state support measures aimed at

the development of the industry, in particular, the development in 2010 of the
Strategy for the development of the automotive industry of the Russian
Federation for the period up to 2020, aimed at the maximum possible increase in
value added at all links in the automotive production chain while improving the
quality component;
- growth in domestic demand for trucks and cars. After the crisis,
the Russian car market grew by 55% in value terms and reached about
65 billion dollars, with about 90% of this indicator accounted for by imports, as
well as foreign cars produced in Russia, while sales of domestic brands
amounted to only about $8 billion76.

In the post-crisis years in Russia, there has been a significant increase in

demand for cars, which is due to a number of reasons. At the same time, since
2010, sales of foreign cars exceed sales of domestic cars. Such trends in the
domestic automotive market testify to its growing and unsaturated nature
and entail the expansion of international sales networks of foreign automotive
TNCs in Russia. The growth in the number of dealer structures of foreign TNCs
is 15-20% per year84, which contributes to increased competition in this area
and exacerbates

76Automotive market in Russia and the CIS. Industry Review/Ernst and Young Report, 2010; Automotive market in Russia and
the CIS. Industry Overview / Report by Ernst and Young, 2011.

118
the problem of ensuring the competitiveness of international sales networks
of passenger cars.
Changes in global trends in the passenger car market after its deep
decline as a result of the crisis in 2008-2009. led to a change in the structure of
production and consumption, both globally and in the domestic market. The
turning point for Russia was 2010, when the automotive market was
recovering from the crisis. It was in 2010 that the structure of the Russian
passenger car market changed, and new long-term trends in its development
were determined.
The dynamics and structure of sales of new passenger cars and light commercial

vehicles in Russia over the past five years is presented in Table. 21.

Table 21. Dynamics of sales of passenger cars and light commercial vehicles in the

Russian Federation (thousand units)

Category Index 2008 2009 2010 2011 2012

Thousand units 2068 1012 1258 1926 2245
Foreign cars85 76.5
71.4 69.1 65.8 72.6
Market share, %
Thousand units 622 349 517 578 538
AvtoVAZ products 18.3
21.5 23.8 27.1 21.8
Market share, %
Thousand units 207 1.4 136 149 152
Other Russian manufacturers
5.2
7.1 7.2 7.1 5.6
Market share, %
Total Thousand units 2897 1466 1911 2654 2935
84Sitov A.N. Ensuring the competitiveness of business structures of the international sales network of passenger cars: Abstract of the
thesis. diss. cand. economy Sciences, 08.00.05. - St. Petersburg: St. Petersburg State University, 2013. P.3.
85Both imported and locally produced vehicles are included
Source: according to the AEB.
Decrease in the share of foreign cars in favor of Avtovaz products in the
crisis and post-crisis 2009-2010. due to the impact of the crisis on the
purchasing power of the population and the operation of the state program
for the recycling of used cars. In 2012, the Russian car market grew by 11%
compared to 2011 and surpassed the peak of 2008. This result set a new
record for the Russian car market and disproved the opinion of some experts
that passenger car sales could return to pre-crisis levels no earlier than 2014.

Important is the fact that in 2010 for the first time the sales of foreign cars

119
Russian assembly (35% or 622.9 thousand units) exceeded the level of sales of
imported passenger cars (34% or 602.7 thousand units) and domestic
passenger cars (31% or 551.5 thousand units). PC.). At the same time, there
was a change not only in the structure of sales, but also in the structure of car
production.
According to the results of 2012, Russia became the second largest
car market in Europe, behind only Germany.

Rice. 10. New car sales in key markets in 2012

Source: Ruth S., Litvinenko S. Russian Automotive Market: 2012 Results and
Prospects. - PricewaterhouseCoopers, January 22, 2013 p.4.

Already in 2013, China's sales in the global car market exceeded US sales
by 2 million units and amounted to 17.9 million units. The share of Russia in
world sales decreased by 5.5% and amounted to 2.26 million units.77After
several years of strong sales volatility, the Russian car market began to show
signs of stabilization - it embarked on a path of steady moderate growth.
Thus, in 2012, sales of new passenger cars increased by 10% and 21% in unit
and monetary terms compared to the previous year, respectively. In turn,
foreign cars made in Russia demonstrated the best

77Litvinenko
S. Russian automotive market: results of 2012 and development prospects. -
PriceWaterhouseCoopers, January 28, 2014 p.4.

120
growth among other categories of passenger cars and increased their market
share to 44%. High market growth rates in 2010-2011 were the result of the
low base effect - after a significant reduction in sales in 2008-2009. Starting
from 2011, growth rates began to slow down, and in absolute terms, the
market continued to grow significantly. Already in 2012, the market also
showed double-digit growth rates, as a result of which the figures for the year
exceeded the pre-crisis sales volume.78Confirmation of market stabilization is
the fact that over the past three years the seasonality of sales has become
more stable and predictable year by year. Slight seasonal fluctuations in 2012
are mainly related to the adaptation of market participants to more moderate
growth rates.
Long-term market forecast for new passenger cars, conducted by
PriceWaterhoseCoopers, is presented in fig. eleven.

Rice. 11. Sales of new passenger cars in Russia until 2025

Note. 2014-2025 - forecast.
Source: Ruth S., Litvinenko S. Russian Automotive Market: 2012 Results and
Prospects. - PriceWaterhouseCoopers, January 22, 2013 p.4.
In accordance with this forecast, the growth rate of the market for new
passenger cars will decrease in the future and reach zero by 2025

78RuthS., Litvinenko S. Russian automotive market: 2012 results and prospects. -

PriceWaterhouseCoopers, January 22, 2013 p.5-6.

121
growth. This will be connected, first of all, with the gradual saturation of the
Russian market.
As already stated above, in Russia the potential for growth in automotive
production is higher than in the United States and EU countries, since our
country is characterized by a low level of motorization of the population
compared to these countries (two to three times lower). Also, one of the
factors in the development of the national automotive industry is the support
from the state. Therefore, urgent measures are needed to improve the
investment climate in the automotive industry while attracting foreign
investment: reducing administrative barriers; development of road transport
infrastructure, simplification of the system of taxation and payment of
customs duties; provision of differentiated investment guarantees;
participation of the state in equity financing of investment projects.

In the current difficult conditions of the development of the Russian car

market and the domestic automotive industry, it is an important task to use
the opportunities provided by the Common Economic Space (SES) created
between Russia, Belarus and Kazakhstan. In this regard, one of the possible
ways for the development of the automotive industry in the Russian
Federation is the formation of automotive clusters, the success of which is
confirmed by the practice of foreign countries. In the future, the development
of clusters will allow integrating national clusters into international ones, for
example, through the EU project "European Automotive Strategy Network -
EASN". Cluster technologies should be used on the territory of the Common
Economic Space to solve the complex scientific and practical goals of the
industry development. The Russian automotive industry is characterized by
the type of industrial clusters, which are concentrated around manufacturers
of end products and suppliers. So, in the automotive cluster of Samara, 40% of
production and labor, 65% of industry funds, 20% of exports and 25%

122
spending on R&D in the region.79

The use of cluster solutions in the automotive industry contributes to:

increasing the level of investment attractiveness of manufacturers and
regions; increasing manufacturability and innovative activity of
manufacturers; formation of a system of long-term partnerships of
cooperation between subjects in the implementation of R&D; inclusion of
small and medium-sized enterprises in the value added chain of automotive
products; creation of new jobs; training of qualified personnel for industry
purposes; provision of information and transport infrastructure for business
development; optimization of transport and production costs; increasing the
efficiency of cooperation between manufacturers, suppliers and public
authorities; unification of engineering and logistics approaches; development
of specialization.80
At the same time, reforming the domestic automotive industry has a number of

unresolved problems, in particular:

- management reform in all automotive companies in the Russian Federation

is in its infancy;
- the level of technology and knowledge of domestic specialists is low, and their

investment decisions are conservative;

- the demand for the latest production and management technologies;
technology in comparison with foreign companies remains low;
- low degree of intercompany cooperation with all partners, including
including in the field of R&D, does not allow domestic companies to increase their
competitiveness.81
Given the above, the state of the national automotive industry remains
unsatisfactory. Our car market

79Materials of the Second Interregional Economic Forum "Samara Initiative: Cluster Policy - the Basis for
Innovative Development of the National Economy", July 2008 - Access mode: http://
2008.forum.economy.samregion.ru/samara_region Accessed 07.05.2011.
80See: Astafieva I.A. Formation and development of automotive clusters in Russia // Economics in
industry”. 2012. P.11-17.
81Gruzinov V.P., Astafieva I.A. Efficiency of industrial enterprises management: theoretical aspect. //
Automotive industry. 2012. No. 8. S.2-7.

123
The country is developing dynamically due exclusively to the growth of
production in our country of foreign automotive TNCs, the development of
various regional and state programs to stimulate demand for cars, state
support for car manufacturers and the growth of the purchasing power of
domestic consumers. In the context of the positive development of the
industry as a whole, there is also a tendency to reduce the share of production
and sales of domestic automotive products in all its possible segments, with a
significant increase in imports and production of foreign brands.
In the foreseeable futurekey factors in the development of the
automotive industry of our country will be:
- state policy aimed at stimulating domestic
consumption and production;

- low level of motorization in our country;

- organization of new productions at the level of joint investment
cooperation between Russian and foreign car manufacturers;
- moral obsolescence of the car park in our country, because
the average age of cars in our country exceeds ten years;
- further development of an efficient credit system for the purchase
cars, carried out jointly by manufacturers and banks;
- Consistent implementation of the car import substitution policy
internal production.
When analyzing the strategic guidelines of the national automobile
industry of our country, the accession of our country to the WTO, which took
place last year, is of great importance. The key consequence of the latter will
be a reduction in import duties on cars for the period up to 2018, which is
planned to be implemented in stages (Table 20). Thus, duties on new
passenger cars will be reduced within seven years from 25 to 15%, but the
main reduction in duties will take place in 2016-2018, which will ensure the
interests of Russian consumers. In turn, duties on used (from three to seven
years) cars after the transition period will be set at 20%. Most foreign
automotive TNCs,
124
that have opened their production in Russia, should achieve full payback of
their projects and receive a return on invested capital by 2018. 11 out of 15
global automotive TNCs already have production facilities in Russia

Table 22. Change in customs duty rates for cars after Russia's accession to the
WTO (2011-2018)
Valid until
accession to When joining the WTO
Car type
WTO
beat
2011
2012 2013 2014 2015 2016 2017 2018
thirty% 25.0% 25.0% 25.0% 22.5% 20.0% 17.5% 15.0%
New
35% 25.0% 24.0% 23.0% 22.0% 21.0% 20.0% 20.0%
Used 1.2-2.8 euros for 1 0.7-1: euro per 1 cu. cm
cc
Sources: Customs Union.
Changes in customs queue rates should be an incentive to change the
structure of demand in the domestic market. Thus, it is planned to increase
the share of sales of cars produced abroad. Accession to the WTO in the
medium term will help change the competitive environment in the Russian car
market. Even before joining the WTO, the government took certain measures
aimed at stimulating the leading automotive transnational corporations to
open and develop new industries in our country. For example, since 2011, the
conditions for the industrial assembly of cars have been changed; imposed
high protective import duties. Such large automobile concerns as Ford,
Volkswagen, Renault-Nissan, General Motors have already adopted new
conditions for industrial assembly, under which foreign TNCs have the right to
import auto components for production at zero duty for an eight-year period.
At the same time, TNCs assume obligations to achieve by 2020 the level of
localization of production in the amount of up to 60%. Also, under the new
regime of industrial assembly, companies undertake to increase production to
300,000 units. in year.

During the first years of work within the framework of the industrial assembly regime, its

participants must bring the level of localization to 10%, after the next year and a half - already

125
up to 20%, and in four and a half years the level of localization should be 30%. For example, the level of localization of Renault Logan cars produced at the Avtoframos plant (Moscow) has

already reached 60%. The company plans that by 2014 its models should be localized at the level of 74%, including through the assembly of French engines in Togliatti. Another example of

significant localization is the production of cars manufactured at the Hyundai plant (St. Petersburg). Since the founding of production, these models have been localized by 45%. The indicator

for the Polo sedan produced by Volkswagen is slightly lower (about 40%) in the city of Kaluga. Also, this full-cycle plant produces three more models with a lower degree of localization (from 10

to 25%), so the average localization rate at the plant in Kaluga is about 30%. At the same time, there are companies that do not fit into the established standards for the localization of

production. Thus, the Toyota plant (St. Petersburg) for 2007-2011. was supposed to bring the level of localization to 20%, but so far only 15% has been achieved. Compensation for producers

lagging behind the localization schedule is possible by paying the usual duties on imported automotive components. The main problem is that domestic components do not meet the quality

standards of the global automotive industry. In this regard, the Ministry of Economic Development of the Russian Federation has signed about 400 memorandums on industrial assembly with

178 manufacturers of automotive components, but so far only 38 companies have concluded real agreements. Toyota plant (St. Petersburg) for 2007-2011 was supposed to bring the level of

localization to 20%, but so far only 15% has been achieved. Compensation for producers lagging behind the localization schedule is possible by paying the usual duties on imported automotive

components. The main problem is that domestic components do not meet the quality standards of the global automotive industry. In this regard, the Ministry of Economic Development of the

Russian Federation has signed about 400 memorandums on industrial assembly with 178 manufacturers of automotive components, but so far only 38 companies have concluded real

agreements. Toyota plant (St. Petersburg) for 2007-2011 was supposed to bring the level of localization to 20%, but so far only 15% has been achieved. Compensation for producers lagging

behind the localization schedule is possible by paying the usual duties on imported automotive components. The main problem is that domestic components do not meet the quality standards

of the global automotive industry. In this regard, the Ministry of Economic Development of the Russian Federation has signed about 400 memorandums on industrial assembly with 178

manufacturers of automotive components, but so far only 38 companies have concluded real agreements. Compensation for producers lagging behind the localization schedule is possible by

paying the usual duties on imported automotive components. The main problem is that domestic components do not meet the quality standards of the global automotive industry. In this

regard, the Ministry of Economic Development of the Russian Federation has signed about 400 memorandums on industrial assembly with 178 manufacturers of automotive components, but

so far only 38 companies have concluded real agreements. Compensation for producers lagging behind the localization schedule is possible by paying the usual duties on imported automotive

components. The main problem is that domestic components do not meet the quality standards of the global automotive industry. In this regard, the Ministry of Economic Development of the

Russian Federation has signed about 400 memorandums on industrial assembly with 178 manufacturers of automotive components, but so far only 38 companies have concluded real

agreements.

The revival of localization processes is possible on the implementation of the

second stage of industrial assembly, under the terms of which four companies - GAZ-

Volkswagen, Renault-Nissan-AvtoVAZ, Ford Sellers and General Motors - undertake to

increase production to 300-350 thousand vehicles per year by 2017 , and the level of

localization - up to 60%. Meanwhile, the number of people employed in the automotive

industry continues to decline. So, if at the end of 2010 550 thousand people worked at

all enterprises, then a year later - already 534 thousand, of which

126
about 70 thousand work for AvtoVAZ82.
The development of the automotive industry in our country is closely
related to the problem of the need to attract foreign direct investment in this
industry. The organization of assembly plants with the participation of the
capital of leading foreign TNCs can bring modern production, marketing and
management technologies to the industry, provide new jobs and, in the long
term, help strengthen our country's position in the global car market. The
latter is due to the fact that foreign TNCs focus not only on the market of our
country, but also on foreign trade in cars. At the same time, it is important to
realize that enterprises controlled by foreign investors are engaged in a full
production cycle and use automotive components produced in the country.

At present, our country is approaching the stage of development of the

automotive industry, which provides for an increase in the level of localization,
the use of local components in the production process. However, the
requirements for 50% and 60% localization83 84are not yet fully implemented,
since it is more profitable for foreign manufacturers to import components
from abroad. In this regard, the level of localization of most enterprises
remains low and does not exceed 20%. The exceptions are Avtoframos (75%),
Volkswagen Group Rus (50%), Hyundai Motor Manufacturing Rus (47%),
Nissan Manufacturing Rus, Ford Sollers, and PSMA Rus (at all three - about
30%)93. Therefore, at the present stage, it is necessary to develop such an
investment policy that will both regulate the activities of foreign automotive
TNCs and stimulate

82Vladimirsky I., Dobrovolsky V. Our auto industry: localization // Autoreview. 2012. No. 5. pp. 20-23.
83On introducing amendments to the procedure that defines the concept of "industrial assembly" of motor vehicles
and establishes the application of this concept when importing into the territory of the Russian Federation auto
components for the production of motor vehicles of headings 8701-8705 of the TN VED, their components and
assemblies: order of the Ministry of Economic Development of the Russian Federation Federation, Ministry of
Industry and Trade of the Russian Federation, Ministry of Finance of the Russian Federation dated December 17, 2009
No. 533/1018/137n [electronic resource] // ConsultantPlus legal reference system. Version 4012.00.43.

84The Avtoframos plant has achieved 75% localization of production. [electronic resource] // Autonews. 2013. September 13.
- Access mode: http://www.autonews.ru/automarket_news/news/1766339/ (accessed 15.09.2013).

127
inflow of direct foreign investments. It is also important to take into account
the fact that the new conditions of the industrial assembly regime encourage
foreign TNCs to localize production on the territory of our country, and not to
import. Increasing production of vehicles, especially foreign brands, will lead
to an increase in demand for automotive components, while this segment is
underdeveloped to meet the growing demand.
In general, Russia's accession to the WTO in the future may have an
ambiguous impact on the domestic automotive industry. Thus, competition
will increase, but this competition will take place mainly between foreign TNCs
that have already opened their production facilities on the territory of our
country. The main negative consequence of joining the WTO will be the loss of
a significant share of the domestic market by national manufacturers Avtovaz
and Kamaz. The decrease in market share will be the result of a decrease in
sales of new domestic budget cars. This segment of the market may suffer
because after the reduction of import duties, consumer preferences may
change and they will buy used high-end foreign cars instead of inexpensive
new domestic cars. Foreign automotive TNCs intend to continue to invest in
our country even after joining the WTO, since the latter will not help reduce
currency risks as a result of the volatility of the ruble exchange rate. In
addition, from the point of view of logistics, local production is more profitable
for foreign car manufacturers that already have a significant share in the
Russian market.

In general, it is possible to identify a number of measures that will

contribute to the optimization of trade and industrial policy in relation to the
Russian automotive industry and will be aimed at further elimination of trade
restrictions and liberalization:
- reducing import duties on the import of cars and bringing them up to
European level, which will allow to ensure fair and equal competition; at the
same time, clear planning is needed to reduce the level
128
import duties to avoid negative effects, as well as set a time frame for the
reorganization of the industry;
- refusal in the shortest possible time from large-scale investments in auto-
mobile industry;
- sale of the state's share in the enterprises of the automotive industry;
private individuals to increase the economic efficiency of the industry, and the social
sphere should remain in the competence and responsibility of the state
In the context of this study, it is of interest how cooperation between Russia
and China in the automotive industry will develop. It follows that throughout its
history, trade and economic cooperation between the two countries has
developed ambiguously. From the end of the 19th century relations between the
two countries were characterized by various forms of cooperation, in particular,
bilateral deputies, Russian concessions in China, cooperation in transport
infrastructure projects. Close ties were also developed between the USSR and the
PRC, the main directions of which were as follows:
1. The development of concessional lending, involving special conditions for
obtaining loans from the Chinese side.
2. Technical assistance from the USSR to the construction of industrial facilities in

in the field of exploitation of mineral resources in the PRC, as well as in the

framework of the supply of complete equipment for the reconstruction of old
industries.
In modern conditions, economic relations between Russia and China are
characterized by sustainable development. In view of its exceptional position in the
modern world economy, China is of interest to our country not only as a major
trading partner, but also as a platform for diversifying economic cooperation in
various areas. The complementarity of the two economies and the high level of
concentration of Russian exports to the PRC leads to the main contradiction in the
relations between the two countries, since the PRC needs raw materials from the
Russian Federation, and the Russian Federation needs supplies of machinery and
equipment from the PRC. Therefore, it arises, as noted by domestic researchers

129
"the need to equalize the raw material bias of Russian exports".85Nevertheless,
China is interesting for Russia as a huge market - a consumer of industrial
products and services, as well as a source of investment resources necessary
for the development of the Far East of our country.
The legal framework for Russian-Chinese economic cooperation in
various areas has been formed by now. For example, in 1992 the Agreement
on cooperation in the field of mechanical engineering was signed, and in 1997
its validity was extended until 2010. Of particular importance are interstate
agreements on mutual cooperation, for example, the Treaty between the PRC
and the Russian Federation on good neighborliness, Friendship and
Cooperation (2001), Trade Agreements, Action Plans between the two
countries. In the past few years, much attention has been paid to cross-border
cooperation between the regions of the countries, as evidenced by the
“Program of cooperation between the regions of the Far East and Eastern
Siberia of the Russian Federation and the Northeast of the PRC until 2018”
signed in 2009 by the countries,86

A number of agreements reached at the highest level formed the basis for their
implementation at the level of cooperation between Russian and Chinese
enterprises, which determined the specific conditions for cooperation. For example,
the introduction of new and high technologies has become one of the seven priority
cooperation projects at the state level.
Over the past five years, a joint working group on the latest developments in
the automotive industry has been successfully functioning. It should be noted that
the Government of the People's Republic of China pays great attention to
cooperation with Russia in mechanical engineering. For example, this collaboration

85Quoted from: Potapenko M.V. Economic interests of Russia in the system of foreign trade relations with China: Abstract of the

thesis. diss. cand. economy Sciences, 08.00.14. - M.: RUDN University, 2013. P.21.

86Zhao Xin. China's foreign trade with Russia: changes in dynamics and structure after China's accession to the WTO: Abstract of
the thesis. diss. cand. economy Sciences, 08.00.14. - M.: IFES RAN, 2012. P.12.

130
The solved problem of China's access to the latest technologies in the military-
industrial complex, which China receives at low prices relative to the world
market, contributes to some problem. In addition, interrelations in the field of
the aviation industry, automotive industry, electronics industry, shipbuilding,
electricity, and environmental protection are being activated. Interstate
academic cooperation plays an important role; As a result of joint
developments, the existing equipment of the two countries is being upgraded.

An important role is played by the analysis of the actual indicators of the dynamics

of trade and economic relations between Russia and China. So, for the period

2003-2013. Trade turnover between the two countries increased from 5.6 times, and the

average annual increase in trade turnover in 2008-2012 amounted to . 16.7%. However,

in the structure of trade, supplies of mineral raw materials, oil and oil products still

account for 67% of Russian exports (for 2013)87. An analysis of the structure of PRC

exports to Russia over the past five years shows that the PRC is increasingly penetrating

not only the Russian consumer goods market, but also the industrial product markets,

creating competition for Russian manufacturers.

Such an active development of economic cooperation contributes to the mutual

solution of the problems of the two countries in the context of reforming the
national economy, the need to increase the efficiency and competitiveness of
economies and markets. Therefore, the economic needs of the Russian Federation
and China are the basis for the development of their partnership.
In turn, the development of trade and economic cooperation between Russia
and the PRC contributes to the strengthening of their positions in the economy of
the region and in the world economy as a whole. The implementation of ambitious
investment projects in transport, automotive, ecology, and energy gives a serious
impetus to the development of multilateral cooperation within Northeast Asia.

87Russian-Chinesetrade and economic cooperation [Electronic resource]. - Ministry of Economic

Development: Foreign Economic Information Portal, 2014. - Access mode:
http://www.ved.gov.ru/exportcountries/cn/cn ru relations/cn ru trade/

131
 At the same time, the level of development of cooperation between the two

countries in the automotive industry is still not high enough. If we consider foreign

trade, then China, becoming an exporter of cars, begins to increase the supply of cars to

our country. The beginning of the popularity of cars from China in the Russian market

was back in 2005, when a significant increase in exports of foreign cars from this

country was recorded for the first time. By 2007, export volumes reached 57 thousand

cars. The global financial and economic crisis significantly reduced the volume of

exports, and in 2009 the volume of exports from China did not exceed one thousand

units.88Already in 2011, Russia became the leader in terms of foreign exchange earnings

from car exports from China, although it continues to lag behind Brazil and Algeria in

terms of physical volume (see Fig. 12).

Rice. 12. Car exports from China to major countries in 2011 (by volume
export earnings, mln USD)
Source: Export of Chinese cars in 2011: Russia among the largest importers [Electronic
resource]. - Center for Sinologists. - Access mode: http://bumafan.ru/articles/negotiations/
entry/2226
Over the past two years, there has been a significant increase in the supply of cars from China to the Russian

Federation. Thus, in 2012, deliveries of cars from China to the Russian Federation amounted to more than

88The entry of the Russian Federation into the WTO will contribute to the return of Chinese cars to the Russian market
[Electronic resource]. - The newspaper "People's Daily Online", 02/19/2011. - Access mode:
http://russian.people.com.cn/95181/7680756.html

132
100 thousand units.89It is noteworthy that deliveries of European brands to the Russian

Federation continue to decline, while Asian brands are increasing. Thus, in 2013, the share

of the Chinese brand Lifan in the growth of sales in our country amounted to 6.9 thousand

units, and the share of the Great Wall brand was 56 thousand units.90In 2013, despite the

decline in the automotive market of the Russian Federation as a whole, there was an

increase in car imports from China (104 thousand units were imported in a year), and for

some car brands an annual increase of 30-50% was recorded.91

89Importof Chinese cars to Russia may grow [Electronic resource]. - Analytical agency "Avtostat",
10/31/2012. - Access mode: http://www.autostat.ru/news/view/11825/
90Litvinenko
S. Russian automotive market: results of 2012 and development prospects. -
PriceWaterhouseCoopers, January 28, 2014 p.7.
91MorzharettoI. Chinese invasion: impossible to stop [Electronic resource]. - Magazine "Behind the wheel". 2014. №3. -
Access mode: http://www.zr.ru/content/articles/624127-kitajskoe-nashestvie/

133
Rice. 13. The role of leading companies in the growth of the Russian car market
(%)
Notes: 1) the contribution of fifteen leading alliances to the growth of the Russian car
market amounted to 83.1%; 2) Chrysler Group LLC belongs to the Fiat strategic alliance.
Source: Based on PriceWaterhouseCoopers and Autofacts.

Apparently, the export of cars from China to Russia in the coming years
will rapidly increase, which, in our opinion, will be facilitated by the following
factors :
one) weakening of the traditional markets of the leading exporting countries - the USA

and EU countries and at the same time increasing the competitiveness of China's

manufacturers;

2) further development of cooperation between the two countries in the field of auto-

mobile industry; for example, the Automotive Industry Dialogue, which has
existed since 1999 within the framework of the APEC Committee on Trade and
Investment, is developing, which is a forum for developing strategies for
developing and strengthening the integration of the automotive industry in the
region. The main objectives of the Forum are the liberalization and facilitation of
the terms of trade in automotive products; development of effective mechanisms

134
cooperation among APEC countries to remove obstacles to the growth of this
industry; joint work of the private and public sectors to improve the development
policy of the industry92;
3) reducing import tariffs and removing barriers to non-tax
nature as a result of accession to the WTO, which will help reduce car prices.

In recent years, car manufacturers from China have been actively

developing their production in the Russian Federation. Thus, the Chinese
company Lifan plans to buy out the unprofitable AMUR plant (Automobiles and
motors of the Urals). Representatives of this manufacturer have been negotiating
with the Russian side for a long time, but it has not yet been possible to reach an
agreement. The Lifan 520 brand is sold in Russia under the name Breez in sedan
and hatchback bodies; as solutions, two gasoline engines with a volume of 1.3
and 1.6 liters are offered, with a capacity of 89 and 106 hp, respectively; the cost
of the car starts from 334.9 thousand rubles. At the modernized plant in the
Sverdlovsk region, it is planned to set up production, the capacity of which may
increase to 120,000 vehicles per year. So far, the parties have not agreed on the
volume of investments and the possibility of attracting local suppliers of
components to the project. Lifan's management announced the planned
investment in the amount of 20 to 40 million dollars, which should satisfy the
government of the region and the management of the AMUR company.
Currently, the assembly of Lifan cars in Russia is carried out by the Derways
enterprise (Karachay-Cherkess Republic), which belongs to the Mercury group of
companies and Sberbank of Russia OJSC.
In various forms, the PRC is implementing a strategy of increasing its global
economic presence. A key element of this strategy is the direct investment of
Chinese manufacturers abroad. In order to facilitate this, the Ministry of
Commerce of the PRC has greatly simplified the procedure for obtaining

92The role of the APEC countries in the development of the automotive industry of the Russian Federation will increase [Electronic
resource]. - Research Automotive and Automotive Institute "NAMI", 10/30/2012. - Access mode: http://nami.ru/presstsentr/
publications/620/

135
investment permits in 135 countries, including Russia.102
In the future, we expect a significant increase in investment from China
in the production of cars in our country. So, for example, by the end of 2015 in
Chechnya (Grozny) Derways will build a plant with a full production cycle for
assembling cars of Chinese brands. The volume of investments only at the
initial stage will be about 500 million dollars.103
In general, at the present stage, the development of economic cooperation

between Russia and China is due to a number of contiguous areas of economic policy of

the two countries, which are systematized in the table below.

Table 23. General directions for building economic cooperation

relations between Russia and China
Russia China
Direction
politicians

1. Innovation- In accordance with the Strategy -2020, the Implementation strategies

ono development transition to an innovative model of economic stimulation development
tie development is an absolute imperative for the through innovation
development of our country -
2. Energy- In accordance with the Energy Strategy of the Further geographical
chesky poly- Russian Federation until 2035, the share of the diversification sources
teak EU in the total volume of exports of Russian energy resources.
hydrocarbons will continue to decrease due to
the diversification of export markets in Asian
countries.
3. Interna- The foreign economic policy of the Russian FederationAchieving bilateral,
rationalization until 2020 provides for a geographical diver- multilateral, regional and
host sification of our country's foreign connections subregional openness and

natural economic relations. economic cooperation

life and
elevation
openness
economy
102Kheifets B.A., Baikov V. Apology of runaway capital // Expert. 2009. No. 3 (642); Kheifets B.A. Stepchildren of
globalization // Expert. 2007. No. 4 (545).
103Investments in Chechnya [Electronic resource]. - Expert Online, 01/27/2014. - Access mode:

http://expert.ru/2014/01/27/investitsii-v-chechnyu/

136
4. Politics The foreign economic policy of the Russian
Increasing the benefits and
in relation to Federation until 2020 provides for the
efficiency of using foreign
cinema- expansion of investment cooperation in the
capital,
strange formation and development of the
stimulation technology,
investment infrastructure of border areas, distribution
investment and knowledge. In
and transport networks, the organization of
addition, China is the main trade
wood processing, food industry, fish
and investment
processing, etc. .d.
partner for their neighbors. -

5. Region The directions of integration of the Russian Federation Accelerating the implementation of
nasal into modern world economic relations have their own the strategy for creating free trade
economic implementation specifics depending on the regions of zones, stimulation
sky policy our country. Thus, in accordance with the Concept of development transport
spatial development of the Russian Federation, in the messages with the countries
South-East it is activated with the countries of the Asia- neighbors.
Pacific region, primarily with the PRC. Except The transformation of the PRC into a
In addition, the FTP is socially base for the production of the latest
economic development of the Far East and equipment and R&D.
Transbaikalia determines the growth of - accelerate implementation.
economic cooperation with neighboring
countries.
6. Policy in Solving the most acute environmental problems of
Amplifying dynamics protection
areas a global nature, including the problem of ensuring
environment. osu
protection radiation safety. Gradual limitation of the load of
the existence of the most important pro-
environmental the fuel and energy complex on the climate and
projects for the restoration of the
environments the environment.
ecological system. Increasing
opportunities in the production of
environmentally friendly clean
products. Promotion
a set of measures against soil
erosion, desertification
waterlogging of forests, etc.

137
 Conclusion
As a result of the study, the following main conclusions were
obtained:
1. World automotive industry at the beginningXXI century is on
a stage of unprecedented transformation, which is reflected, first of all, in
a change in the ratio between the centers of production and consumption
of products, further consolidation of manufacturers in the car market. The
automotive industry is becoming a global industry, located in the
territories of a limited number of countries, but with an active territorial
expansion and export policy. In addition, there is a constructive
convergence and unification of manufactured products, but at the same
time, regional types of products appear that are adapted to the road
transport, climatic, national and cultural characteristics of the country,
which leads to a steady increase in demand for global automotive products
in completely different countries. . In the context of increasing competition
in the global automotive market, many countries have chosen the path of
incorporation into the global automotive industry based on attracting
foreign direct investment from leading automotive transnational
corporations. This is confirmed by the development strategies of the
automotive industry in the emerging markets of the BRICS countries, as
well as Central and Eastern Europe. This is the only way for these countries
to maintain the competitiveness of the national automotive industry.

2. In modern conditions, the automotive industry of China has

certain signs of integration into the global car production system; position of
this country in the world production of cars in 2000-2013. increased from
eleventh to first place, so China is becoming one of the largest automotive
powers in the world. In the periodization of the development of the
automotive industry in the PRC, thefour stages : at the first stage (1953-1966)
the industry was characterized by an emphasis on the production of trucks

138
automobiles and automobile components to them; the main feature of the
second stage (1966-1980) was the diversification of the model range of
cars on the basis of borrowing different models of foreign production
under imported licenses; by the third stage (1981-1995), the material,
production and technical foundations of the modern automotive industry
were formed, which was reflected in the rapid growth in the number of
assembly plants and factories for the production of automotive
components; the specifics of the current stage (1995-2013) is a
combination of market and planned economic methods, which leads to a
transformation in the structure of production, a sharp increase in the
share of passenger car production, the automotive industry finally
becomes the key supporting industry of industrialization,

3. The automotive industry in China is the leading industry

and one of the basic industries influencing the socio-economic development of
the country. The calculations and analysis of the main indicators of the industry
indicate the following emergingtrends its development in recent years:1) an
increase in the country's share in the world car production in the period from
1998 to 2013. up to 22%, but at the same time, unstable growth dynamics in the
specified period; 2) the continuing growth of the level of concentration in the
automotive industry of China; 3) the rudimentary development of foreign trade
in cars in the country, but at the same time - a gradual increase in exports and a
decrease in imports; 4) the unprecedented pace of recovery in car sales in the
Chinese market in the post-crisis years; 5) gradual smoothing in the
differentiation of the location of automotive assembly plants across the territory
of the PRC;
4. Successes in the automobile industry of the PRC were largely
achieved thanks to the competent borrowing of advanced foreign experience in the

development of the automotive industry. At the latest stage of its development

139
China's automotive industry is characterized by an increasing degree of
internationalization , which is realized in the form of export, investment
significant cooperation in the form of joint ventures, scientific and technical
cooperation between Chinese manufacturers and leading automotive
transnational corporations. However, international production cooperation
remains the key form of the industry’s foreign economic relations, implying
not a simple association of foreign investors on the basis of common
economic interests, but, mainly, the organization of a wide production of
intermediate products (mainly automotive components) and linking technical
parameters of the finished product and its components, ensuring the
unification and interdependence of products, taking into account generally
accepted international technical standards.
The effectiveness of the development of the automotive industry in
the PRC lies in a specific combination of such prerequisites. as: significant
volumes of domestic and foreign investment, mass production and export
of inexpensive products of relatively high quality; copying the necessary
technologies of the leading automotive TNCs; the use of cheap automotive
components of own production and cheap labor; implementation of the
state export-oriented policy for the development of the industry. To some
extent, China's strategy is in line with the strategies of reforming the
automotive industry in other major Asian manufacturing countries - South
Korea and Japan, and allows for a gradual increase in export orientation. A
similar development of the automotive industry is typical for other BRICS
countries.
5. Analysis of state regulation of the automotive industry
of the PRC showed that among the mosteffective measures measures undertaken

by the Government in order to increase the competitiveness of the industry include:

maintaining a high level of localization of production in the main production, sales,

and outsourcing of components; compliance with a number of

140
requirements for technology transfer by foreign partners; encouraging the
development of environmentally friendly and economical vehicles;
government order for certain types of products; subsidizing provincial
residents for the purchase of cars, as well as activities for the disposal of
old cars; the desire to form an oligopolistic structure of production based
on the stimulation of consolidation around the largest national producers;
introduction of protective barriers on the import of new cars and a ban on
the import of used cars; provision of tax incentives for enterprises
engaged in R&D in the automotive industry; highlighting the production of
automotive components in the country as a priority for foreign investment;
stimulating the development of Chinese brands.

6. The global financial and economic crisis has led to

many leading countries in the global automotive industry have begun to
implement various anti-crisis programs to reform the industry.Uniqueness anti-
crisis regulation in China was that the government countries sought to increase
demand and consumption in the domestic market in the face of declining export
growth. As a result, the PRC, compared with other leaders in the automotive
industry, most successfully endured the consequences of the crisis, which was
realized through further market liberalization, the implementation of socio-
economic reforms in the country, as well as the selective use of the experience of
leading automotive TNCs. At the same time, the specifics of the
internationalization of the Chinese automotive industry lies in the fact that at the
present stage, the products of joint ventures dominate in the structure of the
Chinese car market and its share is about 70%.
7. Even taking into account the constant increase in the level of competitiveness

China's automotive industry should point to thoseProblems that arise in

the way of China's international expansion in the car market: the still low
quality of products by international standards; not always

141
legal transfer of foreign technologies; overheating in the industry,
expressed in a massive increase in motorization and the creation of a
corresponding burden on the road transport infrastructure and the
environment; maintaining control by foreign automotive multinationals
over most national brands; the need to achieve greater profitability in the
organization of the automotive business, which should be based on
functional diversification in the field of demand management. In general,
the further development of its own technological advantages, as well as
the improvement of product quality, will allow China's manufacturers to
successfully compete with the world's leading car manufacturers in the
near future.Development strategy for the automotive industry sti PRC
should be based on the full development of international economic
cooperation, which will accelerate the integration of the industry into the
global automotive industry. We believe that with the liberalization of the
system for marketing Chinese automotive products in the world market,
the competitiveness of TNCs in the domestic market of China will gradually
grow, i.e. the cooperation of Chinese foreign partners will tend to deepen,
while the forms of cooperation will be more and more liberal.
8. The Russian car market in recent years, like other
emerging markets, develops under the influence of the factor of unsaturation,
low level of motorization and depreciation of the country's car fleet. The analysis
showed that in the structure of the domestic market the share of imported cars
and Russian brands continues to decrease, but the share of foreign cars
produced in the domestic market is increasing. We believe that the parameters
for the development of the automotive industry, announced by the state for
2020, are unrealistic due to the depreciation of production and technological
bases, the lack of modern technologies, the underdevelopment of in-house
engineering, and the insufficient scale of production to increase the level of
localization of production.Urgent action needed aimed at improving investment
climate in the automotive industry when attracting foreign

142
investment: reduction of administrative barriers; development of road
transport infrastructure, simplification of the system of taxation and
payment of customs duties; provision of differentiated investment
guarantees; participation of the state in equity financing of investment
projects. Simultaneouslyfor further liberalization of the Russian car market
are necessary : reduction of import duties on the import of cars; refusal of
large-scale investments in the automotive industry; sale of the state's
share in the automotive industry to private individuals.

9. The current stage of development of trade and economic cooperation

due to the active development of the Chinese economy, as well as changes

associated with the reform of the Russian economy, therefore, cooperation
between countries in the automotive industry is poorly developed; it is
limited to export deliveries of Chinese cars to Russia. At the same time, one
should take into account the objective prerequisites of a geographical,
geo-economic nature, which will further promote industrial cooperation
between Russian and Chinese car manufacturers, their investment,
scientific and technical cooperation in the industry.

143
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 Application
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