A few days ago, TTAC reported that Vladimir Putin issued an ultimatum to foreign car makers, “invest here or else”. 4 days later, VW announced that they were planning a new assembly line at GAZ, and more capacity at their Kaluga plant in Russia. Coincidence? Probably. But it seems like others are following suit. Pretty bloody quickly.
Reuters reports that Hyundai and Kia are now in talks with IzhAvto about using one of their “distressed” (Reuters’ word, not mine) plants to assemble cars. “We are hoping that the talks will be successful and all the terms including one on location will be agreed,” said Dmitry Peskov, a Russian government spokesperson. The plant in question has a capacity of 220,000 units and the plan is to assemble 45,000 Kia cars and 15,000 Hyundai commercial trucks. Now, surely*, the protectionist measures Putin is installing would keep manufacturers at bay, right? Well not when the market in question is up 9 percent from 2009 and, until the recession of last year, was on course to being the biggest car market in Europe, overtaking Germany. Factors like that change peoples’ views on protectionist measures. Are Putin’s measures actually working? Let’s hope not. It may set a dangerous precedent.
* = Don’t call me “Shirley”!
So how is this fundamentally different from the mandatory joint ventures in China? You know, that country that has been misrepresented ad nauseam as living proof of the blessings of free trade?
Sure, Vladimir’s very own endearing diplomatic style has been on display ad nauseam, too, but robust protectionist measures are hardly a novelty, and therefore this is hardly a “dangerous precedent”.
The difference is that China is a member of the WTO and is bound to WTO rules. China has a vibrant new car import market and does nothing to discourage imports. Import duties are according to WTO.
China has no history of kicking out, killing or incarcerating joint venture partners. You can walk through the darkest neighborhoods of Beijing without anybody ever coming close to you.
Unless you insist on starting a car company, for which you need a joint venture partner, you can start Wholly Foreign Owned Enterprises and freely take your profits out.
Russia has a very unpredictable business environment, whereas China’s business environment is more predictable and plannable than most Western environments.
You do have a point regarding the difference between Russia and China – there certainly is one. However, I don’t see how the forcible joint ventures in China are better or fairer than the prohibitive tariffs in Russia. If anything, China’s approach will be more damaging in the long run, as it facilitates the “transfer” of intellectual property, along with the training of a highly qualified work force.
China’s compliance with WTO rules, for now, is due to its own export interests – Russia doesn’t have much in the way of a competitive export industry, so doesn’t bother to play by the WTO rules. Nevertheless, both regimes however have a similar mercantilist outlook, viewing trade primarily as a means to increase power.
” It may set a dangerous precedent.”
Far too late for that. Most countries have protected one or more major industries at one time or another for centuries. It is almost comical that the idea “if you want to sell to our people, you had better employ some of them” has somehow become an evil thought to many. The abstract simplifications of a few (not all!) economists have been used to justify the destruction of much of the middle class in former industrial powers like England. Meanwhile, German, Japan, Korea, China and others continue merrily raking in the rewards of actually making stuff.
Right. Not a lot of fundamental difference between this, Toyoda making a special trip to the Toyota hearings, or the GM/Chrysler bailout. At least Putin is up front about it.
Uh – we did this to the Japanese manufacturers when the big 3 went crying to Uncle Sam in the 70’s. Where were the beotches crying socialism then?
WTO is a BIG step toward the New World Order Bush 1 alluded to before and after his time in office. Putin is a minor player in the NWO, These folks are all about the dollars/yen/ruble with absolutely no conscience – none whatsoever
Tovarisc Avtopromenade, you must be living in a different Russia than the one we are reading about here in the west. Russia where business is welcome and supported even though it’s not owned by a Russian oligarch with ties to the former KGB or Russian mafia, excuse me, government.
I remember times when Russian cars were the subject of endless jokes in countries who had the misfortune of being their main export markets fortunately now only a bad memory. I doubt that the quality of cars improved over the last 20 years while few of them were produced due to an underwhelming demand from the (domestic) consumers.
I have owned several Ladas both in Eastern (Central) Europe and in several developing countries in North Africa and the Middle East. While somewhat lacking in refinement (the interior door panels were held on with self-tapping sheet metal screws, for example) I would take a Lada in a minute of traversing remote areas with questionable roads. They were, in every case, unbelievably rugged cars. The same holds for Russian Kamaz trucks; here in Afghanistan, they function in places and during seasons when NOTHING else can move. Try crossing the Salang Pass through the Hindu Kush in winter time in anything other than one of those beasts, and you will not likely get far. Aircraft are another area where Russian design and construction provide value; given my druthers, I’ll take an IL-76 over a C-130 any day for reliably servicing my clients. And don’t get me started about small arms….
Yes, Russian small arms sure are interesting. A few years ago, I was at a public shooting range in Pennsylvania that rented guns to tourists. The rental guns would be brought out in the morning and chained to the shooting bench. One of the guns was an AK-47 that was well used, and that’s being kind. No finish remained on the external metal, it was all pretty much an even brown color. The wood bits, were similarly free of their original finish. At the end of the business day, while the owner was collecting the rental guns and returning them to the safe for the evening, I asked him if the rental AK-47 had ever been cleaned. “F**K No!”, was the answer. From my observation, the gun functioned perfectly.
Russia would do better to clean up its corruption and thuggery if they want foreign auto investment. Make the business climate more welcoming, rather than threatening. (although, I’m sure Daimler does well there, they seem to love dictatorships and oligarchys) Snipe!
Who says we want your investment? Especially with all the strings that are usually attached to it. We own your debt remember (not as much as China or Japan, but still). If you don’t behave, we’ll just call it.
Am I the only one who watched the above video and was disturbed by it? It shows an unfortunate young man being severely beaten by a Russian criminal dressed in uniform. The criminal seems to greatly enjoy inflicting grievous bodily harm on the man he’s frisking. It’s quite possible the victim was killed from either his liver being ruptured or from the full height fall (head trauma) onto bitumen shortly afterwards.
When visiting a car web site I don’t expect to see a video of attempted or actual murder.
Yeah I know, ‘toughen up princess’ and all. I think I’ll go watch some beheading videos.
TTAC,
I want you to fire Cammy over that video s/he posted.
If you don’t, you will be hearing from my lawyer soon.
Tough
I think we’ll better block you before you create more mayhem. Dosvedanya, Tov. Avtopromenade
Note: Any threats made on TTAC will be dealt with likewise.
You can walk through the darkest neighborhoods of Beijing without anybody ever coming close to you. It’s quite possible the victim was killed from either his liver being ruptured or from the full height fall (head trauma) onto bitumen shortly afterwards.
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