Avtovaz shifts export focus from Europe to Asia

Tightening environmental standards have prompted Avtovaz to temporarily halt vehicle exports to the EU, but the Russian vehicle maker is simultaneously planning exports to new Asian markets to maintain a strong uptick in export generated sales revenue.

In 2018, Avtovaz exported more than 5,000 Lada models to the EU. However, export sales to Europe were affected by the fact that Germany and the Netherlands did not import any Ladas last year, having been two of the biggest sales markets for Avtovaz in former years. That is because Avtovaz’s flagship Lada models now fall outside the EU legislation on CO2 emissions, which require that vehicles have under 120g/km of CO2. Avtovaz’s models have emissions of between 138g/km and 216g/km. While Avtovaz is still technically able to export, the higher emissions figures mean buyers face paying a fee of €2 per year for each gram of CO2 per kilometre emitted above the standard.

However, while exports to certain EU countries have stopped, the company expects exports to grow in 2019 thanks to new markets, according to Avtovaz’s spokesperson. In addition, it plans to return to the European market in a few years with a new model with support from Renault-Nissan.

Oleg Moiseev, general director of the Russian Automotive Dealerships Association, said there was no point for Avtovaz continuing to suffer financial losses on the European market because of new EU environmental standards, given that its share of the market was “miserable”. He added that it would be better instead for the carmaker to focus on the markets of south-east Asia, Latin America and North Africa.

In total last year, Avtovaz sold 360,200 vehicles, up by 16% on the 2017, around 38,000 of which vehicles were sold to foreign markets, according to the carmaker. In fact, Avtovaz said it increased sales outside Russia by 57% last year compared to 2017. As previously reported, figures from Russia’s Industry and Trade Ministry indicate that the majority of export sales remain within the Commonwealth of Independent States (CIS), and only 32% of exports went to other countries last year. The main markets for vehicle exports from Russia were Belarus, Kazakhstan, Ukraine, Uzbekistan and Azerbaijan (all CIS), followed by Algeria. However, those exports helped improve the company’s financial performance in 2018 when it generated 5.4bn roubles ($90m) of net profit, compared to a 4.5bn roubles ($75m) net loss suffered in the previous year. This was the first year in the past decade, when Avtovaz generated a net profit.

Furthermore, Avtovaz has recently unveiled plans to make 26 new models in the next decade for both domestic sales and export.

In terms of new export markets, Avtovaz has recently signed a major contract with Mongolian dealership Russo Motors. Avtovaz is receiving Russian state support for export projects and Max Missana, export department director of Avtovaz, said the company expected Lada to account for 15% of sales on the Mongolian finished vehicle market in the future.

In earlier statements Avtovaz also said that it planned to expand sales in Asia, including in China, Vietnam and some other countries.