Automotive News - September 8, 2008 - (Page 39) SEPTEMBER 8, 2008 • 39 Auto profits rise in Russia Ford, GM, others benefit from demand for accessories and high-end models John Revill and Luca Ciferri jrevill@craincom.de Russia rising New-car sales in Russia 2008 forecast: 3.15 million* Jan.-June 2008: 1.45 million* 2007: 2.41 million** Source: *PricewaterhouseCoopers **Global Insight Image-conscious Russians are making their country one of the most profitable in Europe for automakers. Russia is becoming extremely lucrative not just because Russians are buying more Western cars but also because they love accessories and high-end models. Booming Russian sales and profits are helping automakers offset declining sales in traditional European markets. Within three years, Russia is on track to overtake Germany as the highest-volume car market in Europe. Said Nigel Brackenbury, Ford Russia’s managing director: “On its own, I don’t think the Russian market can make up for the tough times in the rest of Europe. But Russia is making a growing contribution to our profits because of the volumes we are selling here.” Said Jacek Gorski, director of General Motors in Russia: “We are making a pretty decent profit in this market.” cent to 1.45 million units in the first half of 2008, but the value of new cars sold rose 64 percent to $33.8 billion. Profits for Ford Ford of Europe’s big improvement in profitability in part stems from its success in Russia, analysts said. Ford of Europe’s second-quarter pretax profit margin was 5.1 percent this year, up from 2.3 percent in the same period in 2007. From January through June in Russia, Ford’s sales grew 20 percent to 116,794 units, according to figures from the Association of European Businesses in the Russian Federation. In the first half in western Europe, Ford sales declined 3.4 percent to 645,225 units, according to the European automakers association, ACEA. New-car sales in the European Union fell 2.1 percent to 8.29 million units, according to ACEA. A Credit Suisse report estimates that in 2003, sales of cars priced under $10,000 covered 85 percent of Russian sales. In 2007, their share was down to 26 percent. Meanwhile, cars priced over $20,000 covered 30 percent of Russian sales last year, up from 7 percent in 2003, according to Credit Suisse. “We see Russia as one of the most profitable car markets in the world,” said Adam Jonas, a London-based auto analyst with the investment banker Morgan Stanley. Said Jens Schattner, an auto analyst at Oppenheim in Frankfurt: “As there are no incentives in Russia, compared to about 10 to 15 percent in western Europe, Russian sales are more profitable for foreign automakers than in western Europe.” Analysts estimate that operating margins for some automakers in Russia could be 10 to 20 percent. c Up-selling works Gorski said Russian customers rarely buy basic models. “We create packages of options which are much more profitable for us,” Gorski said. “In some cases, this can add 50 percent to the profits we are making on the cars.” Image is important for Russians, he added: “People aspire to a better car, and sometimes Russians overspend their budget to get a better car. They are receptive to up-selling.” Automakers do not disclose profitability per region, so no official figures are available for Russian sales. But analysts polled by Automotive News Europe agreed that: Russian demand is so strong that automakers do not need to offer sales incentives. For foreign brands, the Russian market has a much higher sales mix than western Europe. CSM Worldwide analysts forecast sales of SUVs to be 18 percent of the market in Russia, compared with 8 percent in western Europe. According to PricewaterhouseCoopers, unit sales in Russia grew 43 per- Maintain tire pressure. Retain customer loyalty. The UltraFill® 99+ Nitrogen Tire Inflation System offers the highest purity and the ability to service multiple bays in a compact, low-cost unit. We also offer an Automatic Inflation Cart that can fill all four tires to uniform pressure at once while still on a vehicle. © 2008 Air Products and Chemicals, Inc. Offering UltraFill 99+ high-purity nitrogen tire inflation is the best new customer retention tool. 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Table of Contents Feed for the Digital Edition of Automotive News - September 8, 2008 Chrysler Financial hikes dealer floorplan fees Back in business? Detroit's best bets for cash: Feds, UAW Document fee suits swamp Missouri dealers Honda's family squabble Used truck prices rebound Ford mulls Lincoln compact Toyota delays RAV4 plan Proposed flex-fuel mandate roils industry Chrysler sues consultant over sourcing Cobalt transaction prices are up $775 since April Nissan looks to Mexico for engineering aid To retain truck buyers, Nissan offers more stuff Press: Chrysler is pushing forward on electric cars Leasing falls to 4-year low GM: Currency shift stalled Astra Dealers say they can sell the Republican ticket Industry loans clash with GOP climate Grand Cherokee will get axles from new plant Makers must resist urge to backslide as gas price dips Times are tough outside the U.S., too Chevrolet does tout its small cars Let natural gas power the fuel cell A crash course in collaboration Dodge wouldn't rush the RamBox Plastics are losing cost advantage Suppliers expect to benefit from tougher CO2 rules 'People just want Ford to go' For now, Honda will skip electric vehicles Toyota, Subaru enter race to market electric vehicles China exports squeezed Study: 15% of wrecked autos got washed titles Mercedes megadealer is bullish on luxury Sheehy: 'We are not in business for nostalgia' Automakers use driving schools as marketing tools Dodge smoothes Ram's rough edges â a little Honda touts leasing while others fall back Alysha Webb Study: Nonprime car loans get longer Dealer CPA group picks leader BMW, Edmunds team up on loan site for consumers Va. Honda dealership loses protest bid Judge throws out deceptive-ads lawsuit against Toyota in Arkansas Mo. dealership's protest gets go-ahead Pa. court throws out suit against Ford, dealership Dealers Ross' interiors company pushes into China, India More than a game Nissan's Tavares: Green conference keynoter Quality group seeks to set consulting standards Personnel Dana to shift HQ by Sept. '09 Tenneco to supply Volvo XC60 BMW gets Siemens conveyors IAC to cut 280 jobs in Sweden Polytec to acquire Peguform Metaldyne to sell Italy operation Federal-Mogul to build India plant Beck, Delphi make pact TRW to supply Chinese sedan Auto profits rise in Russia Black Book expands data Hayes Lemmerz cuts losses Ford: Buyouts are a tough sell GM's party plans include production Volt An ice-cold August for auto sales Big drop in Aug. output Lights, camera . . . Volt? In case the roads get too quiet . . . The Insight rides again Lagonda brand will be back Milwaukee road trip: No old pals, but 1 new lesson Choice of Odell seen as Ford vote of confidence in Volvo Dana sort of wins an award Automotive News - September 8, 2008 Automotive News - September 8, 2008 - (Page Introducti) Automotive News - September 8, 2008 - Detroit's best bets for cash: Feds, UAW (Page 1) Automotive News - September 8, 2008 - Detroit's best bets for cash: Feds, UAW (Page 2) Automotive News - September 8, 2008 - Toyota delays RAV4 plan (Page 3) Automotive News - September 8, 2008 - Cobalt transaction prices are up $775 since April (Page 4) Automotive News - September 8, 2008 - Cobalt transaction prices are up $775 since April (Page 5) Automotive News - September 8, 2008 - GM: Currency shift stalled Astra (Page 6) Automotive News - September 8, 2008 - GM: Currency shift stalled Astra (Page 7) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 8) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 9) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 10) Automotive News - September 8, 2008 - Grand Cherokee will get axles from new plant (Page 11) Automotive News - September 8, 2008 - Let natural gas power the fuel cell (Page 12) Automotive News - September 8, 2008 - Let natural gas power the fuel cell (Page 13) Automotive News - September 8, 2008 - Plastics are losing cost advantage (Page 14) Automotive News - September 8, 2008 - Plastics are losing cost advantage (Page 15) Automotive News - September 8, 2008 - Suppliers expect to benefit from tougher CO2 rules (Page 16) Automotive News - September 8, 2008 - 'People just want Ford to go' (Page 16A) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16B) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16C) Automotive News - September 8, 2008 - Toyota, Subaru enter race to market electric vehicles (Page 16D) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 17) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 18) Automotive News - September 8, 2008 - For now, Honda will skip electric vehicles (Page 19) Automotive News - September 8, 2008 - Study: 15% of wrecked autos got washed titles (Page 20) Automotive News - September 8, 2008 - Study: 15% of wrecked autos got washed titles (Page 21) Automotive News - September 8, 2008 - Mercedes megadealer is bullish on luxury (Page 22) Automotive News - September 8, 2008 - Mercedes megadealer is bullish on luxury (Page 23) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 24) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 25) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 26) Automotive News - September 8, 2008 - Sheehy: 'We are not in business for nostalgia' (Page 27) Automotive News - September 8, 2008 - Automakers use driving schools as marketing tools (Page 28) Automotive News - September 8, 2008 - Dodge smoothes Ram's rough edges â a little (Page 29) Automotive News - September 8, 2008 - BMW, Edmunds team up on loan site for consumers (Page 30) Automotive News - September 8, 2008 - BMW, Edmunds team up on loan site for consumers (Page 31) Automotive News - September 8, 2008 - Judge throws out deceptive-ads lawsuit against Toyota in Arkansas (Page 32) Automotive News - September 8, 2008 - Pa. court throws out suit against Ford, dealership (Page 33) Automotive News - September 8, 2008 - Dealers (Page 34) Automotive News - September 8, 2008 - More than a game (Page 35) Automotive News - September 8, 2008 - Personnel (Page 36) Automotive News - September 8, 2008 - TRW to supply Chinese sedan (Page 37) Automotive News - September 8, 2008 - TRW to supply Chinese sedan (Page 38) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 39) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 40) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 41) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 42) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 43) Automotive News - September 8, 2008 - Auto profits rise in Russia (Page 44) Automotive News - September 8, 2008 - GM's party plans include production Volt (Page 45) Automotive News - September 8, 2008 - GM's party plans include production Volt (Page 46) Automotive News - September 8, 2008 - An ice-cold August for auto sales (Page 47) Automotive News - September 8, 2008 - An ice-cold August for auto sales (Page 48) Automotive News - September 8, 2008 - Big drop in Aug. output (Page 49) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 50) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 51) Automotive News - September 8, 2008 - Dana sort of wins an award (Page 52)
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