Common Economic Space Russia – EU, November 16, 2006

Common Economic Space Russia – EU, November 16, 2006

Common Economic Space Russia-EU

“Success Stories and Obstacles”

Henrik Nenzen

-Chairman Automobile Manufacturers Committee ,AEB

-President Ford Motor Company ZAO


Automobile Manufacturers Committee

European Brands

Alfa Romeo Opel

Audi Peugeot

BMW Porsche

Citroen Renault

Fiat Saab

*Jaguar Skoda

Lancia *Volvo

*Land Rover VW

Maybach MINI

Mercedes-Benz

____ OtherCadillac Jeep Chevrolet Lexus Chrysler MazdaDodge Mitsubishi*Ford Nissan Honda Subaru Hummer ToyotaInfiniti

•33 Global Cars and Commercial Brands

•Support the development and growth of the Automotive Sector in Russia

•Support fair business rules


Automobile Manufacturers Committee

• Monthly meetings- Board of Directors

• 8 Working groups

– Automotive Regulations/Homologation

– Customs

– Statistics

– Used Vehicles

– Fuel Quality

– Marketing/Exhibitions

– Customer Legislation

– Public Affairs


Automotive Industry Success Stories

• Industry sales growth

• Dealer network development

- Sales/ service/ parts/ retail finance

• Investments in manufacturing plants

- 7 in operation

- 6 planned

• Vehicle Homologation Harmonization EU-Russia.

Potential Future Successes

• WTO

• Establishment of a effective used vehicle sector

• Clean emissions/ Fuel Quality and Vehicle Safety


Strong Growth 2000-2006

2000 2006 Projection

1,100,000

1,750,000

4%

49%

- Non-Russian Brands

+59%

+1830%


Growth Factors

• Low ownership rates

• Disposable Income up

• Retail finance break through

• Total Equation – low price Total Value

+

Business Environment

• Stable political situation

• Property / land ownership rights

• Green channel introduction

• Personal Income and Company Taxation


Dealer Network Development

Ford Example • November of Dealers - 2000 17 2006 134• Employees - 2000 510 2006 13.400• Training- 7.340 Student days in 2006.Latest Global Standards Transfer EU-Russia

- Customer Care processes and standards - Technical

- IT - Sales - Financial - Employer retention/ motivation

- Buildings and Equipment


T’umen

• Sales Volume : 1540 units

• $ 2.7 mils


Moscow

• Sales Volume: 3303

• $ 11.0 mils


Saint Petersburg


• $ 3.5 mils


Perm


• $ 3.5 mils


Nizhny Novgorod

• Sales Volume :417

• $ 4.2 mils


Omsk


• $ 4.5 mils


Samara

• Sales Volume:1599

• $ 2.2 mils


Stavropol

• Sales Volume :1439

• $ 4.5 mils


Pyatigorsk


• $ 1.8 mils


Neftekamsk


• $ 1.6 mils


Almetievsk


• $ 1.5 mils


Foreign Direct Investments- 6 Manufacturing Plants within 3 years.- Decrees 166/566 excellent support with double effect: also for development of auto components manufacturers.- Better opportunity for Russian Manufactures due to components supply improvement- Sales of locally produced foreign brands.

118000

735000

1058000

0

200000

400000

600000

800000

1000000

1200000

2005 2008 2010


A New Potential Industry


A New Potential Industry

Used Vehicles Trading trough Official Dealers

New VAT regulations required – allow dealers to sell Trade-Ins without VAT (European practice)

Advantages

Government

• Transparent business

• Higher employment

• Safer cars on the road

• Higher VAT revenues

• Dealership investments

Customers

• More convenient

• Safer cars

• Warranty on used vehicles

Manufacturers/Dealers

• Higher sales of new cars

• Profit opportunity

• Service work


AEB – Fuel Quality Improvement Plan

AEB agreement with 1 or 2 oil companies

– The oil company guarantees fuel quality at filling stations

– AEB members recommend all customers to use fuel only from selected partner (s)

– Independent organization checks fuel quality levels


Ford in Russia


Ford Growth in Russia

1416 4358 6669

39237

120000

20712

60564

0

20000

40000

60000

80000

100000

120000

140000

2000 2001 2002 2003 2004 2005 2006Plan


Ford Growth in Russia

2000 2006

Turnover $17 mils $2.0 bils

Parts Sales $ 4 mils $66 mils

Number of dealers 17 154

Ford Ranking 12 1 projected

Focus №1 Nameplate (foreign brands) – 3.5 years

Fusion №1 Small car in 2006

Transit №1 Among medium commercial vehicles


Ford Investments in Russia


Ford Training Centre/ Office Plans

Opening – Spring 2007


Russia - One of Top Three Automobile Growth Markets in the World

• Excellent framework

• Selected areas to be addressed

• Common rules and framework benefit both EU and Russia


Obstacles

“There is no man or woman who fails if is only persons who stop trying”

Common Economic Space Russia – EU, November 16, 2006

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