Toyota is revamping its import strategy for finished vehicles into the Russian market, including plans to scrap use of offshore ports in Finland and elsewhere in Europe, explore the use of new entry points in the Black Sea and the Far East, as well as increase onward rail distribution in Russia, according to Fumitaka Kawashima, senior director responsible for sales, logistics and dealer development, speaking at last week’s Automotive Logistics Russia conference in Moscow.
With the exception of a small plant in St Petersburg that builds around 20,000 Camrys per year, the Japanese carmaker will continue to import the lion’s share of Russian vehicles from Japan, the UK, Turkey, France and South Africa, said Kawashima, even as rival carmakers plan extensive localisation in the country. Kawashima revealed that Toyota is targeting sales expansion in Russia from 90,000 units in 2010 to 120,000 this year, with plans to boost this to beyond 200,000 by 2013.
The conference revealed that Russia’s vehicle market is expected to remain strong. Forecasts at the conference, including those of Toyota, Volkswagen and the Association of Russian automakers (OAR), call for sales this year to finish between 2.2m-2.5m light vehicles (from 1.9m last year). Sales are predicted to grow steadily for the next decade, climbing back to the 2008 peak of 3m vehicles by 2015, at which point Russia is expected to surpass Germany as the largest market in Europe.
But Toyota’s approach to increasing market share will differ from its other foreign rivals in the country, having opted not to sign up to ‘decree 166’, the latest targets designed to encourage increased local production for foreign carmakers in return for preferential duty rates. The decree sets targets of building 300,000 cars per year with localisation rates of 60% for vehicles and 30% for components–levels that easily double the current rates for most carmakers in the country. VW, Renault-Nissan and GM each have targets of building at least 350,000 cars in Russia themselves and in collaboration with Russian carmakers by 2013, while Ford has also made plans to build cars with Sollers.
Toyota is still assessing the decree to which it will eventually localise in Russia, according to Kawashima. As such, the Japanese carmaker will depend on a fluid and efficient vehicle import and inland distribution network if it is going to stay competitive on lead-time and price.
Until now, Toyota has relied on array of Baltic ports for vehicle deliveries into Russia, including historic use of the port of Hanko in Finland and even Gdansk in Poland. But more recently it has made substantial use of the Fishery port in St Petersburg as well as the port of Ust Luga. As of this summer, Toyota will eliminate use of ports outside Russia.
Kawashima also revealed plans for further significant changes to the OEM’s Russian import and distribution network in the near future. They include the use of ports on the Black Sea as well as in the Far East. There are currently no well-developed facilities in the Black Sea, he said, “but we think this would be a very good option for Turkey. We are looking very seriously for terminal partners in the region, as well as in the Far East.”
Toyota would also like to expand its use of rail. It currently moves some 85% of imported volume by truck, and has only recently begun to move the other 15% by rail, notably from Ust Luga to the Ural region and to Siberia. The OEM has also begun trials with RailTransAuto (a finished vehicle rail operator at Ust Luga that is half-owned by the Russian Railways state monopoly) to assess how to respond to the temperatures of a Siberian winter. “If we have a positive result, then we will expand the use of rail for this area,” said Kawashima.
He went on to say that Toyota would like to increase the movement of SUVs, in particular, by rail, but pointed to a lack of closed rail wagons and the risk of damage and repair costs.
In the short term, Kawashima said that Toyota and other carmakers may face capacity constraints in the ports and for onward distribution by the fourth quarter, particularly as Japanese production is expected to try to make up for volume lost since the earthquake in March.
VW Russia’s director of group service, Jan Bures, estimated that the Russian market was already 30% short of transport capacity, while GM Russia’s head of purchasing and supply chain, Peter Layer, estimated the shortfall for outbound trucks alone to be nearly 2,000.
Kawashima’s colleague Olga Valieva, senior manager for vehicle logistics, warned that ports and onward distribution restrictions will be “severe” for the company, and added her voice to the message to LSPs. “We are relying on logistics providers to step up their investment and meet the market demand,” she said.
A full report on the Russia conference is available at www.automotivelogisticsrussia.com.
