Andrey Reznikov, managing partner of Motorinvest, and Wang Peng, head of Dongfeng in the Russian Federation, on expanding cooperation

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The Russian auto industry is actively increasing cooperation with concerns from China. The managing partner of Motorinvest spoke about how Lipetsk Motorinvest expands its line of models and switches to Dongfeng distribution, as well as the impact of the disposal fee and the exchange rate of the ruble Kommersant. Andrey Reznikov and head of the Dongfeng representative office in Russia Wang Peng.

– On what line of cars are Motorinvest and Dongfeng currently cooperating, and what changes are being prepared?

Andrey Reznikov: In Russia, almost no one produces electric vehicles in the passenger segment in industrial volumes. We found a great partner, Dongfeng Corporation, two years ago, and agreed on a long-term work for more than ten years. According to Evolute, we have been ranked first among electric vehicles in the Russian market since the start of sales at the end of last year, which showed the effectiveness of both the product and the business model. In January, we launched Voyah, and in June it shared third place in sales in the entire premium segment with the Lexus brand – we sold 400 cars. Only Mercedes and BMW sold more. Against this backdrop, we approached Dongfeng with a proposal to expand our lineup with internal combustion engine vehicles, which have a higher sales volume.

Wang Peng: We have decided that there will be joint distribution in the passenger segment of Dongfeng Corporation in Russia. Dongfeng Motor Rus will remain the company’s official representative office in the Russian Federation and the CIS and an importer, while Motorinvest will deal with the sale of cars. Now the Russian market, due to the current situation, requires quick decisions, and we saw an opportunity for growth with the support of Motorinvest. And not only in relation to, say, a paper union, but also the consolidation of the labor resources of our teams. For example, we are discussing the adaptation of the model range for Russia.

– And how will your relationship be financially arranged? Will Motorinvest work for a commission?

A.R.: Dongfeng Corporation ships machines to us, and within the agreed wholesale and retail prices, we are already engaged in promotion, warranty, stock formation to support dealers, marketing, exhibitions and so on. The dealer network development policy will remain with the corporation, and Dongfeng has already planned the transition of dealers to new standards this year.

— Is it acceptable to use the current Evolute network, for example, to place cars in one dealership?

A.R.: No, not in one dealership. Only a separate salon.

– Your relationship with the Dongfeng brand does not affect production and does not involve release in the Russian Federation?

A.R.: No, nothing is changing here now. In terms of potential localization, we are discussing this issue. As part of our special investment contract, the annual production of electric vehicles should be about 30 thousand cars in the fourth or fifth year of production. Since the electric vehicle market itself is still underdeveloped in the Russian Federation, it will be difficult to sell more than this volume. At the same time, the production capacity of Motorinvest is designed for about 100,000 vehicles. Therefore, we are considering the possibility of reloading production for an additional 70,000 machines in order to improve the cost and make the product more competitive.

– 100 thousand – is this the capacity for welding and painting? Will any new investments be required for this?

A.R.: Yes, it’s CKD and we don’t need much new investment in this cycle. We estimate the volume of investments from $1.5 million to $2 million in the localization of welding of one model. Further, only the reconfiguration of robots for coloring, and in general, that’s it.

– Investments in production on the conveyor, if we talk about the Dongfeng brand, should be joint?

A.R.: We are always glad to partner’s investments. But, for example, in the case of Evolute electric vehicles for us, the main contribution from the partner is the permission to reengineer the technological platform, which was created in China, for localization in accordance with the requirements of the Ministry of Industry and Trade in the Russian Federation. As you know, the development of any car in itself is an investment of more than $500 million per model. And such capital investments are a difficult task in the current market and in the current economic situation.

– Three Dongfeng models are now presented, among which there are no traditional crossovers for the market, but there is a Dongfeng Shine Max sedan. Should it replace Kia K5, Toyota Camry?

V.P.: Any product that we launch is exactly what the market needs. Don’t you think so? We will also have crossovers, this is just the beginning. In general, we want to bring to the Russian market not the old model range, but what is just appearing in China. But now we must give the market a car of this class, which is most in demand. Not everyone, for example, wants to ride a crossover in a taxi. Of course, we will compete for a corporate client and taxi-car sharing. So far, only the first batch has arrived.

– What will happen to the model range represented by Motorinvest in general?

A.R.: According to Evolute we will have five models. Two are already presented: i-Pro and i-Joy. Today you can see it at the stand of the Lipetsk region (at the Innoprom exhibition.— “b”) i-Sky model, and it will be put on the conveyor in September along with two more i-Jet and i-Van models. That is, we immediately launch three models into production. We want to expand our presence in a more premium segment with a price of more than 6.5-7 million rubles. with localized models. For premium Voyah, we already have three models presented, and the fourth will appear in the first quarter of next year.

V.P.: In the Dongfeng lineup, we should have at least five models by the end of the year – from a compact crossover to a large-sized crossover, a pickup truck and a sedan. To cover all segments.

– Prices for Dongfeng Shine Max (from 2.99 million rubles) were announced at the end of May. Pricing for the Evolute i-Sky is expected to be announced. Given the weakening of the ruble and the increase in salvage fees announced on July 7, will prices be higher?

A.R.: These are factors that affect the entire market. And, accordingly, the entire market will change. Naturally, direct imports, which now occupy more than half of the market, will rise in price, while local production will increase in volume. According to Voyah in the premium segment, the change in prices is unlikely to affect the position of the brand, since we do not yet see serious competition in the market.

– But for the price of Evolute, will the disposal fee be sensitive?

A.R.: Utilsbory Russian producers are still compensated. Since Motorinvest today fully complies with the localization requirements under the SPIC, we hope to receive compensation related to the waste collection in full. And then, in fact, the change in the fee should not significantly affect our pricing.

Interviewed by Olga Nikitina

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