Managing Director & Senior Partner, BCG Henderson Institute Fellow
Russia’s auto industry is back from the brink. It recovered to precrisis sales levels in 2012 and—more importantly—is currently benefiting from an unprecedented amount of investment into new and modernized production facilities. With more than US $10 billion committed to upgrading facilities and expanding capacity through 2020, the auto industry is the one industrial sector in Russia that is attracting serious levels of direct foreign investment.
This revival was undoubtedly driven by the Russian government’s policy of supporting foreign investment in the auto sector. Such investment followed a “localization through partnership” blueprint that encouraged global OEMs to invest in local production, source components locally, and form partnerships that support the modernization of domestic OEMs.
Yet it remains to be seen whether this wave of investment and modernization will be sufficient to transform the Russian auto industry. The question is whether the upgrades and expansion will elevate the sector’s products, customer service, productivity, and cost efficiency to be globally competitive in the face of a more uncertain macroeconomic outlook, slower growth in demand, and continued pressure from imports.
In this report, we look back at the “tectonic shift” that has transformed the auto sector since the crisis, explore all the factors contributing to a positive scenario for the sector’s development to 2020, and examine the seven key requirements that will make this projected scenario a reality. The auto industry presents a highly visible case for testing Russia’s effort to sustain and modernize its industrial base. The industry’s importance vastly outweighs the 2 percent share of national GDP that it currently represents.