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Slovaks to Build a Plant in Russia

Hospodárske noviny´s discovery. Company Automotive Group SK to decrease high costs by production in St. Petersburg.

Restrictions on the customs led them to the idea of not importing the products but to produce them directly in Russia. They therefore took the local automotive market by storm. „Limitating customs duty in Russia inspired us to conduct a market research and subsequently launch production in the country „ says Peter Topor, the Sereď´s company sales manager.

Plant for 100 Employees

The company cuts and sows all types of industrial fabrics one finds in a car. Its customers are prominent automobile suppliers with a production capacity all around the world.

The Sereď company sees its bright future in Russia. They are going to establish a subsidiary in May there. If everything runs according to the plan, by the end of this year a new plant will have been opened. It could employ about 100 people. The investment is not expected to exceed EUR 150,000 since the premises are planned to be rented by Automotive Group SK.

Challenging Russia

Even experts do not doubt Russia is a potential market for the automotive sector.“ All prominent automobile suppliers are turning their attention to Russian market as a particularly promising source of many sales. Last year 2.9 million new cars were sold here which was beyond all expectations.“ explains Jiří Šimara, the Cyrrus company´s analyst .

The company Automotive Group SK will start its Russian expansion soon, specifically through its business subsidiary. Automotive market in Russia, however, is diversified, it was therefore important to choose also the suitable starting point.

Starting position in St. Petersburg

„Since the production plants of our positional business partners are located in more regions we have chosen St. Petersburg, this being one of the regions, to be the subsidiary´s headquarters. We are going to establish Automotive Group SK RU company there through which we will further develop our business activities“ explains Peter Topor, the sales manager.

Besides Russia being prospective market, the analysts point out to potential problems the firms can have. “The risk that the investors in Russia have to count with is a rather vague political development and completely different business culture from what we are used to in Europe,“ states Jiří Šimara, the Cyrrus analyst .

Jumping- off point

Automotive Group SK, which employs up to a hundred people in Slovakia, wants to build a multinational company with a purely Slovak share. The long- run plans are subordinated to this fact. “Expansion into Russia is going to represent the first foreign investment and we consider it as a jumping-off point for our further investments and expanding with activities on new markets.” explains Peter Topor.

Russia to be the first

The company is also having an eye on China. „We do have the intensions to launch something similar in China. Firstly, we have to see how well we are doing in Russia.“ says the manager highlighting that the company is interested mainly in four world markets besides Russia and China, these being India and Brazil. „We try to diversify our productions into more industries and markets to eliminate and lessen the impact of a potential economic crisis.“ adds Peter Topor. Automotive industry is unstable in Asian market, too. „Chinese automotive market is not in good shape which local automotive association confirms by lowering this annual growth estimation from 8% to 7 %. Still, China keeps holding the label of the biggest automotive market in the world,“ concludes Jiří Šimara.

Tatiana Jurašková