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Russians don't trust their own car brands
(The Birmingham Post Via Thomson Dialog NewsEdge) Ducking and weaving as they struggle to make progress in Moscow's dense traffic, hulking black SUVs, Ferrari sports cars and battered old Ladas battle for space, writes Conor Sweeney.
Just 20 years ago, there was a fraction of today's traffic on the city's grey roads and, apart from diplomatic imports, all cars were Soviet models like Zhigulis and Volgas.
The Kremlin's current rulers are belatedly encouraging a nationalist resurgence, but former Volga owners are ignoring the command and opting instead for ever bigger and brasher foreign brands - like those on show at this week's International Auto Show in Frankfurt - if they can afford them,.
"Why am I driving this Land Rover? Because it's comfortable," said Yuri Golobayev, rubbing his hands along the dashboard to show his appreciation, as he sat in traffic near Red Square.
"In the communist days, we didn't have a choice, so my first car was a Moskvich, then a Kopeika."
Such brands were once popular in the Soviet Union. Russians now don't trust their traditional car makers, he said, if they can afford to buy a foreign make instead. "Yes, foreign cars are more expensive, but people just go to the bank and buy them on credit."
Outside the capital, where the average monthly income is pounds 250 per month and roads are poor, Western brands do not dominate - except in the far East, where imported second-hand Japanese right-hand drive cars are common.
On Russian roads, there are still 13 million Ladas and 5.5 million other Russian cars, so they will continue to be a major presence for a long time, especially in the provinces.
Indeed in many provincial towns, the height of automotive chic remains a souped-up Lada, complete with blacked-out windows, jacked-up suspension and spinning silver hub caps.
"One reason there weren't many foreign cars in the regions until now was because there weren't dealerships," said Ivan Bonchev, a car industry expert with Ernst and Young's Moscow office. "It's only now the major makers are developing elsewhere."
Environmental factors like emissions from big engines are not really on people's minds yet, he says, although stricter official controls on engine pollution take effect next year.
Some say you can tell a lot about the owner by the car, so while wealthy auto fanatics drive Bent-leys, rich businessmen wishing to seem powerful travel in a black Mercedes S600, followed inches behind by a Mercedes G-Wagen carrying body- Golobayev guards.
Waiting outside the upmarket Tsum department store in downtown Moscow, most cars are driven by chauffeurs.
One young driver stood out, though he was mostly hidden behind the wheel of his low-slung bright red Porsche 911 Carrera 4S and wore oversized dark glasses.
"Why did I buy a Porsche? Because I like it," he insisted. "I just like driving nice cars."
Then, his phone rang and his girlfriend demanded he pick her up - immediately. And he was gone.
Costly foreign cars have their drawbacks though.
The Porsche Cayenne is so popular with thieves that insurance companies insist owners install costly GPS tracking systems and add an extra surcharge - if they offer cover at all.
Diesel-engined car owners can face trouble during the harsh Russian winters, when temperatures plunge to minus 20 Centigrade or below, making their motors impossible to start.
Yet oversized automobiles are even part of a typical Russian marriage, in another sign of the country's new car culture, as giant stretched Hummers cruise around cities with newly weds drinking champagne and having photos taken at popular landmarks.
Renault remains in talks with Russian auto group AvtoVaz - maker of the Lada - as the French carmaker seeks additional production capacity in the rapidly growing Russian market.
Speaking at Frankfurt, chief executive Carlos Ghosn said: "Between 1999 and 2006, the world car market went up 20 per cent to 64 million vehicles. In the US, Japan and Europe the evolution was zero. All the other countries practically doubled. Growth is exploding in Russia, China, India, Brazil, Indonesia or the Middle East.
"As a car manufacturer, you want to make sure you're there. Not only with plant but also with the product."
Renault has already decided to extend Avtoframos, its existing production joint venture with the city of Moscow, but Mr Ghosn said that was not enough.
"We are selling euro-zone cars in a dollar market and with the dollar weak against the euro, which is a trend we do not expect to change; there is some urgency to produce cars locally," he noted.
Renault's partner Nissan makes cars in Saint Petersburg and ships cars from Japan, which has a more favourable currency relationship with the dollar.
Renault is also talking to other local producers and is considering setting up a site from scratch. But while it would be in total control if it built a greenfield factory in Russia, this would take time.
"Yes, foreign cars are more expensive, but people just go to the bank and buy them on credit
Yuri Golobayev
Copyright 2007 Birmingham Post & Mail Ltd , Source: The Financial Times Limited
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