Business and Management
Submitted By whiteman
The Russian economy is the 10th largest economy in the world by GDP (1), and the 5th largest European country by GDP. The Russian economy has grown by 4.3% for the past two years (2) which is greater than both the global and European average GDP growth rate. Despite being the fifth largest economy by GDP in Europe, it is the second largest automotive market in Europe behind Germany and the seventh largest in the world (3). In 2011, there were 2.65 million light vehicles sold in Russia worth a collective $65 billion. The most popular car brand in Russia is Lada which controlled 22% of the market in 2011. This is down from the previous year where they accounted for 27% of sales(3). In June of 2001 General Motors entered into a partnership with Russian manufacturer AVTOVAZTogether GM and AVTOVAZ began producing the Chevrolet Niva which was based on the Lada Niva concept which was ultimately not produced due to AVTOVAZ’s lack of cash flow(4). The Chevrolet Niva has been a great success for both companies with demand outgrowing supply leading to a multiple month waitlist simply in order to purchase a Niva (5). This partnership has helped GM enter into the Russian market without much of an initial investment while being able to use AVTOVAZ’s expertise in the Russian market. The plan has been so successful that GM is recently approved an expansion of the production facility in Russia. (5)
The Russian automotive market has a large amount of potential upside for GM. The Russian economy has been growing at a faster than average rate, and GM is positioned to take advantage of this growth due to their partnership with AVTOVAZ. Russian consumer demands have been changing over the last decade and LMC automotive predicts that Russian consumers will continue to increasingly favor brands from foreign manufacturers (Exhibit 1). The Russian market is also far from saturation due…...