Local contents, industrial policies: is there a Russian exception?

Publication Type:

Conference Paper


Gerpisa colloquium, Kyoto (2014)


In 2012, Russia became the second largest automotive market in Europe after Germany. With 2.7 Mio cars sold in 2012, Russia accounts for 5% of the worldwide sales, like India and Brazil. 9 carmakers represent 76% of new passenger car sales, which is greatly due to the investments done by foreign companies since 2001. However, the Russian automotive industry often appears more challenging and less stable for foreign companies than other emerging countries. How can it be explained? What are the policies designed by the Government to attract foreign investments? Can we speak about a Russian exception? This presentation aims at giving an overview of the challenges that faces the automotive industry in Russia, in terms of the structure of the industry, and of the coherence of the industrial policies.

We will see that foreign multinationals plays an important role in the reshaping of the production basis. Due to numerous plants developed in the 1960s in former Soviet Republics (especially for the production of trucks and buses), the historical integration of production, and the focus on SKD and CKD production in the 1990s, in the beginning of the 2000s, the industry was partially dislocated. In that situation, the role of foreign carmakers can be seen both in the development of local clusters (most of the investments were done in three regions: St-Petersburg, Kaluga and Togliatti), and in the evolution of industrial relations. From several viewpoints, the activism of trade unions in foreign carmakers’ plants greatly changed the nature of industrial relations, from social partnership to disputes between workers and firms. However, if the Russian automotive industry changed tremendously during the 2000s, there is still a lack of local production of components.
Compared to Brazil, China and India, few foreign suppliers have production facilities in Russia. Facing this situation, the government fostered industrial policies limiting SKD/CKD production, and increasing the level of local contents. Such policies lead towards the creation of special economic zones (such as this of Alabuga, Republic of Tatarstan) to attract component makers. Since 2011, the measures are even strengthened with specific targets to be achieved within 6 years. The objective of the government is clear: stimulate the development of local competencies in order to have a stronger national value chain. For these reasons, the Russian case embodies the strategies of governments in emerging countries, putting even a stronger emphasis on the necessity to have high levels of local contents. The restructuring of the Russian automotive industry is therefore very critical, shedding light on the everlasting problem of both attracting foreign investors, and developing local competencies.

Within one decade, the development of the Russian automotive industry is the story of internationalization of its local production basis. It appears today that the incentives launched by the government to foster local production are advantageous to foreign carmakers and suppliers. At the same time, there is still a lack of foreign suppliers and local competencies. The Russian case is not an exception of the development of emerging countries, but due to historical specificities, the challenges are even greater to develop a strong national industry.

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