As Other Automakers Abandon Russia, Mazda Sees Opportunity With Engine Plant
As the price of oil and gas sinks to below $50/barrell, so does Russia’s economy. The former Soviet state, highly dependant on oil and gas revenues for growth, is expected to experience economic shrinkage between 3.4 and 6 percent this year. That isn’t good if you’re doing business in rubles and some automakers are beating a hasty retreat.
Not Mazda.
Like Ford and Hyundai-Kia, Mazda is sticking it out in Russia with their manufacturing partner Sollers (which is also the manufacturing partner of Ford since 2011). The two have just signed a Memorandum of Understanding to begin assessing a new engine plant in the country.
News of the memorandum comes just a day after Ford and Sollers officially opened their engine plant in Tatarstan, Russia to the tune of $275 million. That plant will build up to 105,000 engines a year for Ford’s Fiesta, Focus and EcoSport models sold within the country.
Mazda’s Russian operation is similar. The current agreement between it and Sollers has seen “around 80,000 Mazda cars” produced in Russia since operations commenced in 2012, according to the automaker. The engine plant would further shield Mazda and Sollers from the volatility of the ruble as imported goods become more and more expensive.
GM is learning the hard way that leaving the country might not have been to its best interest. In addition to giving up global volume to their competitors, the General is now in a fight with the dealers it leaves behind, with some of those dealers demanding more alimony in the separation. If those dealers do plan on turning around and selling cars from other brands in the future, General Motors has — in an indirect manner — paid for other automakers to take their market share in Russia.
The value of the ruble has fallen nearly 50 percent against the U.S. dollar over the 12 months.
More by Mark Stevenson
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Just got back from vacation in Siberia, the silver lining to the ruble collapse is that as a person coming with dollars, man now is the time to visit! I'm actually tempted to buy an older Russian car there to keep in my grandma's garage for when I come to visit for a few weeks each year. Clean rust-free rwd Ladas and Moskvitch/Izh 412s (those kept in garages during the winter) can be had for $500-1000 all day long, a rougher but running example for $250 or less. I'd have to get it registered and insured under a relative's name of course. The effect of the sanctions hasn't really hit the "man on the street" in my family's part of Siberia (Altai Krai) too badly, unless you were planning on buying a new import. A few more well to do relatives in Novosibirsk were grousing about not being able to get their favorite French cheese anymore, but in rural villages where people never knew of such a cheese and couldn't afford it anyhow, life goes on as it always has. When you live off the land, growing your own food and getting by with little, global calamities tend to pass you by a lot easier.
This should be a huge boon to Ford and Mazda. A little known fact is that on condition of meeting a certain local percentage of domestic parts the automakers can get a huge break / elimination of tariffs on the other percentage. Building engines locally brings them closer if not to that needed percentage. This should benefit ford the most as they product quite a few models locally. I noticed ford just started local production of the fiesta, and the price is actually not bad for once.