Auto tech companies battle chilly winds of Russian economy

While some Russian companies continue with ‘business as usual’, others develop and test new strategies. However not everyone in the automotive industry has suffered losses.

“We are continuing to develop our programmes that help dealers weather such crises,” says Steve Chernysh, CEO at AutoDealer-University.

While there aren’t any new strategies for company growth during the crisis, the company is sticking to the retail automobile business that they know. They are focusing on the two key areas of their expertise: sales and after-sales.

“We currently are working with several OEMs on major projects, that have a long term focus,” Chernysh says. “Some OEMs believe in Russia and understand that their dealer body is a key component of their long term success.”

The AutoDealer-University has experienced a drop in sales which has resulted in a loss of profit. In order to save money and invest in growth, training expenses are being cut. Chernysh believes that general car sales will remain flat in 2016 and that the economy is being adversely affected by the country’s political leaders.

Manufacturers in Russia who target middle-class customers such as Ford, Nissan and Avtovaz’s Lada have suffered greater losses than luxury brands. Chernysh points out that it is owing to the exchange rate that sees Russia enjoying the cheapest luxury goods in the world, thus attracting customers to the fixed prices.

“Mass brands are sold to middle class persons, who are very much influenced by consumer confidence,” says Chernysh. “Mass brands will only increase their sales when either consumer confidence increases or temporarily with various government incentives.”

“This decline [in the automobile industry] has affected us in a positive way,” says Innokenty Belotsky, chairman and CFO at BrightBox. “The competition between OEMs has become tighter and they use our technology as one of the key competitive points to increase the market share.”

BrightBox is a company that works directly with OEMs to make their cars connected before they are sold to the customers. They are also an authorised supplier as an OEM of the Kia factory in Russia.

According to Belotsky, the success of BrightBox lies in the fact that even in a declining market, customers are aware of the value of connected services and demand them from car producers. In order to improve business, the company’s goal for this year is to make more than 50% of sales outside of Russia. They have signed a contract with one of the leading car producers in the Middle East and are looking for more international partners.

“The car sales in Russia are fully dependent on oil prices,” says Belotsky. “If you can predict the price of oil, you will become an expert in car sales in Russia.”

Another company that didn’t feel any direct affect from the declining automotive industry was ALD Automotive. Ilya Shaykin, the head of the new business development unit at ALD Automotive, credits this to mostly working with the B2B segment and customers’ demands remain on the required level.

“The main [negative] affect was owing to increased car prices which moved companies to reconsider their plans for 2015 and prolonged current running contracts,” explains Shaykin.

To improve sales, ALD Automotive plans to increase their volume through opening sales channels that are new to the Russian market. Their main target is creating long term relationships with customers and succeeding in this makes the company resistant to a difficult economic environment.

“Crisis usually opens many opportunities, not for immediate growth, but for the future,” says Shaykin. “ALD automotive keeps strategy for growth despite the crisis.”

Shaykin believes that the following two years will be difficult for companies and that some will leave the market and new ones will appear. It is important for ALD to keep the high level of service as the market of full service leasing is very young in Russia and there are a lot of opportunities for growth.

“When you have a good penetration to middle-class customers, it is easier to feel stable and try to develop in new markets,” Shaykin refers to non-luxury car brands, who like Chernysh, attributes the successful sales of pricier brands on the devaluation of the Russian Ruble.

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