- Russian automaker TagAZ is considering a switch from manufacturing Hyundais to manufacturing BYD cars.
- TagAZ is embroiled in a disagreement with Hyundai over payment for components.
- Historically, Chinese cars have not sold well in Russia.
TAGANROG, Russia — Russian automaker TagAZ is considering a switch from manufacturing Hyundai products to manufacturing cars from BYD of China. The origin of the desire for change is a disagreement over payment for the supply of components from the Korean company — and the fact that Hyundai will be launching its own plant in St. Petersburg in early 2011.
A source close to the Russian company told Inside Line that TagAZ is completing three new lines for the production of Chinese cars. He says TagAZ is considering production of three Chinese models, including BYD, as well as cars under its own brand. Estimated production volumes, as well as the level of investment, have not yet been disclosed.
Many Russian analysts have expressed skepticism about the production of Chinese models in Russia, noting that negotiations with Chinese automakers in the past have been long and hard. They also point out that Chinese cars don't sell well in Russia despite prices in the tempting $3,000-to-$5,000 range, because of low quality. In 2008, sales of Chinese cars in Russia fell by 30 to 50 percent, reaching only 24,500 units in 2009.
Inside Line says: Chinese companies' move into Russia looks fraught with challenge, at least for now. — Evgeniy Vorotnikov, Correspondent
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