December 7, 2015 / 4:08 PM / 2 years ago

Ford's Russia unit looks to exports to offset slump in home market

MOSCOW (Reuters) - U.S. carmaker Ford’s F.N Russian unit is considering expanding exports as weak sales in its home market look set to continue for another year at least, its chief executive told Reuters.

Mark Ovenden, chief executive of Ford Sollers, U.S. carmaker Ford's joint venture with Russian partners, poses during an interview with Reuters in Moscow, Russia, December 4, 2015. REUTERS/Maxim Zmeyev

Russia’s auto industry is a major casualty of the economic crisis precipitated by the collapse in oil prices and Western sanctions over the Ukraine conflict.

Car sales are down over 30 percent year on year in the first 10 months of 2015 as consumer purchasing power has been eroded and business activity contracted.

That has prompted local carmakers to eye exports to minimize losses, while Ford’s rival General Motors Co GM.N quit Russia.

“Export is something we’re looking at,” said Mark Ovenden, president and CEO of Ford Sollers, Ford’s joint venture with Russian partners. “I’d like to look at it beyond a few thousand (vehicles) ... and see whether there is a more strategic export opportunity for us.”

Ford Sollers already exports into former Soviet countries such as Kazakhstan in small volumes, but Ovenden said the company could also target markets in Eastern Europe and beyond.

Ford has a presence in Eastern Europe with a factory in Romania but it does not produce all of the models there that it produces in Russia, where it makes the Fiesta, Focus, EcoSport and Transit, among others.

It is considering all of its model types for exports as well as engines made at a $275 million powertrain plant it launched in the Russian republic of Tatarstan this year.

Ford sold around 30,500 cars in Russia in the first 10 months of the year, roughly 40 percent less than in the same period a year earlier, according to data from the Association of European Businesses lobby group.

It can produce as many as 350,000 cars a year in Russia and hence has considerable potential to ramp up exports.

Ovenden said he expected total Russian car sales this year of around 1.5 to 1.6 million units and the same amount next year, well below the 2.5 million units sold in 2014 and the 3.5 million Russian carmakers are capable of producing per year.

“The challenge everyone will face is that when domestic demand is volatile, how do you continue to fill the capacity?” he said in an interview at Ford’s offices on the outskirts of Moscow. “That’s where I think you need to develop the export capability.”

Russia-based car manufacturers exported some 80,000 units in the first 10 months of the year, according to customs data, a comparatively small amount. Exports to traditional markets in the former Soviet Union are sharply lower as their economies are in the doldrums too.

While several producers including Volkswagen VOWF_p.DE and Nissan 7201.T have said they could ramp up exports from Russia, they are yet to announce final decisions.

Ovenden said Russia-based carmakers would need continued government support for these plans to come to fruition, however. He said this could take the form of freight support or duty repayments for imported parts that have become more expensive due to the weaker rouble.

Russia’s government has said it could provide support measures worth around 50 billion roubles ($726.3 million) for auto producers in 2016, according to recent comments by Deputy Prime Minister Arkady Dvorkovich.

That compares with 2015 measures worth 43 billion roubles.

($1 = 68.8450 roubles)

Editing by Anna Willard

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