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00 20-22 October 2010. Russian-Turkish Business Forum Thematic trend: Strategy of innovative development of Russian Federation automotive industrial cluster.

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Presentation on theme: "00 20-22 October 2010. Russian-Turkish Business Forum Thematic trend: Strategy of innovative development of Russian Federation automotive industrial cluster."— Presentation transcript:

1 00 20-22 October 2010. Russian-Turkish Business Forum Thematic trend: Strategy of innovative development of Russian Federation automotive industrial cluster Report theme: Regions’ development by means of Industrial parks creation. Project of Dimitrovgrad Industrial Park creation Reporter: Chairman of the Management Board of ОАО «United Automotive Technologies» Mihail Nikolaevich Dobyndo

2 11 1.Brief information about UAT plants 2.Brief description and plants location 3.The necessity of government support for operating plants 4.Development trend of production line of UAТ plants 5. Greenfield development in Samara and Ulyanovsk regions 6. Choice of UAT plants development trends: Greenfield or Brownfield on the example of DIP project 7.Project development support from Ulyanovsk Region Government concerning Brownfield development and Joint Ventures 8.Brownfield project development and Joint ventures on the examples of DIP 9.Availability of production areas for projects 10.Proposals to change regulatory framework for automotive components manufacturers support

3 22 Brief description about UAТ plants UAT «United Automotive Technologies» was established in 2008. Company managers twelve industrial plants manufacturing automotive components which located in different regions of the country. Actually UАТ is the first automotive component cluster in Russia UAT «United Automotive Technologies » was established in 2008. Company managers twelve industrial plants manufacturing automotive components which located in different regions of the country. ОАО «United Automotive Technologies» brings in investments (including foreign) into Russian automotive Industry, raise competitiveness of manufactured products, extends production line, and as a result, increases business worth. At the present moment the main aim of UAT is formation of the instrument for AVTOVAZ strategy realization of formation automotive component «quasi-branch» around automotive manufacturer and to the highest extent is aiming to mother company activity – AVTOVAZ. Strategic Company’s plans include establishing Joint Ventures with foreign partners, oriented to automotive components production, assembled in Russia within production localization programs

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7 66 Gas exhaust system Rear suspension modules Lock systems, access system and door modules Air and fuel electronic engine supply systems Steering system Front suspension module Cooling and heat exchanging vehicle systems Braking system Chassis Wheels Suspension Bumpers and springs Steering Supporting elements Braking system Engine/ Assist systems Engine Additional power systems Conditioning system Exhaust system Fuel injection Body and exterior Passenger seats Front section Rear section Roof Front doors/rear doors Front/ rear part Trunk door Windows/glasses Lighting Systems of locks Windscreen wipers Additional equipment Interior Roof Saloon Passenger protection Doors Pedals Acoustic Ventilation Power supply Tape recorder Engine control Chassis/actuator Comfort Safety Electrics JV Planning modules for assimilation by UАТ plants Planning technologies for assimilation by UAT plants Small stampings Average and big stampings Automotive turning parts Metal Powder metallurgy Aluminum castingJoint VentureIron castings Upset forging technology Rubber parts Production Main functional vehicles modules (TIER I) JV Cimos JV Development of traditional competencies Assimilation of new competencies Development trends of UAT plants production line

8 77 The necessity of government support for operating enterprises The plants owned by UAT were built in the beginning of 70-s years of the last century for supplying AVTOVAZ with automotive components. Most of the plants, due to application of the gradation system, used to be town-forming enterprises, which besides of population employment, provided towns with central heating, sewerage and drain waters cleaning. UAT’s plants fulfill their main task by supplying AVTOVAZ conveyer but together with out-of-dating old models «Classics» and minimum volumes of component development for new vehicles modules, plants are loosing production volumes very rapidly. Understanding the situation, Ulyanovsk Region Government and OАО «United Automotive Technologies» signed the agreement about joint project creation «Dimitrovgrad Industrial Park» in Dimitrovgrad town in the manufacturing site of ОАО «DAAZ». ОАО «DAAZ» and a number of plants located in this territory, used to provide 100% of AVTOVAZ volumes on injection and cooling engine systems, heating saloon systems, locks, window regulators, mirrors and so on. The aim of Industrial Park Creation is transformation of UAT’s plants from today-yesterday status into new supplier model, providing in such a way a traditional role of reliable supplier for automotive assembling plants, and the most important point, providing population employment at the expense of creation new jobs instead of the old ones which are going away together with old vehicle models. To solve this task is possible only with the partnership with the leading world famous automotive component manufacturers. Meanwhile, leading automotive manufacturers do not hurry to localize production in Russia, offering direct parts deliveries from their abroad plants. If you were on their place you would do the same, as applicable regulations of 10-s years favor their activities: concessionary duties (0 to 14%) for components import, as for assembly, so as for resale at after market; absence of possibility of bringing in government’s investments into energy communications, which are on the plants’ balance; absence of government support concerning investments into plants’ R&D. A possible way out of this situation can be a federal, regional and local authorities support for the operating plants.

9 88 Greenfield Development in Samara and Ulyanovsk regions. SPECIAL ECONOMIC ZONE OF INDUSTRIAL TYPE «TOGLIATTI» Territory area 660 Ha REGULATION OF CREATION GEZ ISSUE ✍ Federal law «About Special Economic Zones in Russian Federation» №116-ФЗ of July, 2, 2005. ✍ RF Government resolution of August, 12, 2010. N 621 «About creation of Special Economic Zone of Industrial Type in the territory of Samara region” ОЭЗ ПТТ «TOGLIATTI» STAVROPOLSKYII REGION Togliatti Financing of creation engineering, transport, social, innovative and other infrastructure at the expense of: Federal budget- 53% (7193 millions of rubles); Samara region budget – 5,7% (734 millions of rubles); Samara region Stavropolskii district municipal budget – 0,3% (40 millions of rubles ); Off-budget resources - 41% (5602 millions of rubles ). But there are more than 300 000 m 2 not being used production areas with prepared infrastructure in the territory of Togliatti. Project is being realized at government support at expenses of budgetary appropriations from Investment Fund of RF(RF Government directive of 28 August 2009 №1250-р) SPECIAL ECONOMIC PORT ZONE (SEPZ) INDUSTRIAL ZONE «ZAVOLZHJE» According to experts it is possible to expect start of production in 2014-2015 Comparison of Ulyanovsk region privileges with General Economic Zone (GEZ): N п/пPrivilege ОЭЗ «Alabuga"Ulyanovsk region rate (%)Period of validityrate (%)Period of Validity 1Income tax15,5For pay-off period13,5For pay-off period 2 Local taxes Property tax0 10 years, from the moment of registration0 For pay-off period, but not more than 8 years Land tax0 10 years, from the moment of property right registration0 For pay-off period, but not more than 8 years Transport tax010 years0 For pay-off period, but not more than 8 years 3 Customs duties exemption and VAT at import of foreign equipment (raw material) for privileges territoryExemption Privilege for SEPZ «Airport - Vostochnyi» 4 Creation of industrial zones, provided by necessary engineering communicationsAs a part of privileges 5Payment for connecting to power networkDoesn’t impose Doesn’t need 6 Provision of subsidies for payment % at refinancing rateNo informationAs a part of privileges

10 99.. Price reduction for manufacturing at the expense of prepared industrial buildings Price decreasing for logistics Outsourcing or service functions Minimization of investments risks Long-term contracts with OEM Sales market development at the expense of partners’ sales markets Experience in execution of logistic and service functions Formation of cooperation chains concerning new products manufacturing Choice of development trend of UАТ plants: Greenfield or Brownfield on the example of DIP projects Prepared infrastructure, provision by personnel Димитровградский Индустриальный парк Preservation of jobs Creation of conditions for social stability in the region Investments to buildings repair and infrastructures Tax revenue Positive influence on secondary industries (building, maintenance service) GreenfieldBrownfield (operating plants) Building of engineering infrastructure at the expense of federal, regional and local budgets The necessity of houses and social infrastructure building for the personnel or organization of personnel delivery by buses from the nearest population centers Competition with the operating manufacturing sites Additional costs of Government Non-realization of automotive industry development program concerning development of trend «Partnership» Diversion of funds for a long period Personnel can’t wait for some years during building and starting of production at Greenfield and people have to find jobs in different regions Strategy of plants development envisages usage of operating manufacturing sites of Brownfield, the process of Joint Ventures has already begun.

11 10 Project development support from Ulyanovsk Region Government concerning development trend of Brownfield and Joint Ventures 1.Regulatory framework regarding to concessionary taxation of Industrial parks is being formed now in October-November 2010 2. The system of «common window» is being created now during 2010 – 2011 3. Bringing in investments by means of Intergovernmental agreement is being organized during 2010 – 2015 4. Social block development is being organized(hotel business, relaxing infrastructure) during 2010 – 2012 5. Ulyanovsk region project development in the field of automotive industry, logistics and industrial cooperation, regional and urban infrastructure (investments bringing in) in 2011 Increasing of tax revenue into regional budget Financial model Tax preferences New productions development 3 1 4 2010 - 2018 Bringing in investors 2 Plants are getting a new development impulse Joint Ventures are being created Business structure of the current manufacturers is being changed, new products appear Additional employees are involved – social status of region is being stabilized EVEN TODAY, during 2010-2011 the product localization process is going on !!!

12 11 Brownfield project development and Joint Ventures on the example of DIP Joint ventures ООО «DAAZ» TIER-I ОЕМ Other customers market services услуги order product order partner R&D technologies ООО «Dimitrovgrad Industrial Park» Investments and federal programs (investment protection from the side of Ulyanovsk region Government) investments R&D technologies preferences Ulyanovsk region Government

13 12 Availability of production areas for projects 2-nd priority 1 st priority 3-d priority Free areas 6 408 m2 Areas, planned to be freed by 2012 70 337 m2 Areas for projects being realized 46 553 m2

14 13 Proposals to change regulatory framework for automotive components manufacturers support 1.Continuation of government politics concerning support of automotive manufacturers components regarding to requirements on components production localization for OEM in the territory of Russia 2.Requirements on higher volumes localization – min 80% automotive components in the territory of RF 3.Creation of Joint Ventures at the operating Brownfield 4.Increase of customs duties at the import of foreign components (at the present moment average 14%, to increase to 35%) 5.Investments to Greenfield only in case of absence of operating productions at Brownfield 6.Government financing of electric-power modernization, logistics and road building of operating Brownfield 7.Credit concessionary program for Russian party (at 5-6% annualy) 8.Subsidization of 50% R&D for operating plants

15 14 Thank you for your attention!

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