Focus on Ford in Russia

1
Focus on Ford in Russia

• HENRIK NENZEN

2
Russia. Country overview.Density of
population.11 Time zones 17 million km2 .

Twice size of V.S.
10 000 km
4000 km
3
Allocation of 2010 Year Ford Vehicle PARC across
Russia Parc Growth 5 times
National Total 2005 Ford10 Year PARC
168,745 2010 Ford 10 Year PARC 813,344
4
Economic summary
Projection

• 
  2006
  2007
• GDP Y-o-Y
  6.6 6,5
• GDP per capita
  6,296
• Federal Budget Balance - GDP 4.5
  5,4
• Consumer Prices
  10.2 7,5
• Disposable Income
  gt15
• Trade Balance
  13 Actual
• Gold, Foreign Currency Reserve
  357 billion
• Foreign Debt
  56
  billion
• Stabilization Fund
  108
  billion

5
Negative factors

• Banking sector reforms slow
• Pension System
• Environmental issues. Life expectancy 58 years
• Competitiveness of Russian Companies due to Ruble
  appreciation
• Independent media is weak

6
Positive Factors

• General
• Rich on raw material - 29,5 of world oil exports
• Stable economy, unemployment reducing
• WTO accession - agreement 04 / 2007
• Company/personal taxation low 25/13
• VAT planned to be reduced from 18 to 15
• Automotive
• Decree 166 - 7 new manufacturing plants in next 3
  years
• Decree 566 for components manufacturers
• Retail finance - 25 and growing
• Cars / 1000 at 180 (Germany 591, Czech 389 )

7
The Russian New Car Buyer

• Ford Ford
  
• Russia Europe
• Age
  37.0 years 46.7 years
• Men/Women
  84/16 69/31
• Family Size
  3.3 2.8
• Marriage/ Living together
  74 75
• Number of cars in household
• 1
  56 45
• 2
  33 42
• 3
  11 14
• Average Income
  20,800 46,300
• First time buyer
  12 1
• Retired
  4 21
• Business/Everyday
  48 33
• Commuting to work
  77 70

8
The Russian Car Buyer

• Buying less small cars
• Buying more SUVs
• C-Segment largest
• High knowledge base
• Wants latest technology/ models/ dependable cars
• Low purchase price preference changing to total
  value
• Cost of ownership important
• Next car will be larger
• Require geographical coverage
• Brand

9
Industry Development
- Non-Russian brands
10
Foreign Brands Country of Origin YTD Mar 2007
Chevrolet is in Korea
Japanese and Koreanbrands target Russia for
growth
11
Segment Changes 2006/2007 Non-Russian Brands
73,9
Ford 145
12
Competitive Segment Shares
13
Competitive Segment Shares
14
Producers
15
FIRST FORD MANUFACTURING PLANT DELIVERED TO THE
SOVIET GOVERNMENT IN 1932
16
Ford Motor Company ZAO
July 2002 Ford opens the first non Russian
owned car manufacturing plant March 2003 Second
shift April 2004 third shift Capacity 75000
2007 Plan 75000 Cumulative production 150000
17
(No Transcript)
18
Ford Motor Company ZAOPAG/Ford organization
harmonization current

• PAG/Ford organization harmonization current

Present Status One legal entity, ZAO Ford Motor
Company, since 2002 Shared Functions -
Office co-location - Systems/ helpdesk
- Vehicle importation and outbound logistics
- HR - Accounting/ Treasury/ Taxation -
Technical Training Center - Purchasing
- Media buying - Legal
19
New 2007 Ford InvestmentsNEW PARTS DISTRIBUTION
WAREHOUSE 2005 and 2007
20
NEW FORD 2007 INVESTMENTNATIONAL TRAINING CENTER
21
NEW FORD 2007 INVESTMENTNEW OFFICES
22
Ford Growth in Russia

• 2000
  2006
• Turnover 17 mils
  2 bills
• Parts Sales 4 mils
  67 mils
• Number of dealers 17
  154
• Ford Ranking 12
  1
• Focus ? 1 Nameplate (foreign brands) 4th year
• Fusion ?1 Small car in 2006
• Transit ? 1 Among medium commercial vehicles
• C Max , Ranger segment leaders

23
Ford Growth in Russia
24
Decree No166 Industrial Assembly Low Duties
Components Import

• Almost 0 duties on majority of imported
  components (3.5 total Car BOM) ilo 25 on BU
  import
• Not less then 25K production capacity for
  vehicles
• Body construction process mandatory
• Obligatory localisation or pay-on-miss
  10/20/30

25
Local Production Foreign Brands

• New plants/ operation
• VAG 2007 SKD/ 2009 CKD
• Toyota End 2007
• GM 2007 (SKD
  Captiva already started in SPb )
• Hyundai 2007
  (Commercial Vehicles)
• Fiat 2007
  (Through Severstal)
• GAZ 2007/8 LDV and
  Sebring/Cirrus.
• Nissan 2008/9
• PSA 2009 TBC
• Land Rover 2008
• WTO entry expected for Russia in 2007 including 7
  years protection for decree 166.

26
Foreign Brands Expand Local Production
27
Foreign Brands Expand Local Production
CapacitiesSales Projection, (000) units
28
FINANCIAL PLANNING VOLUMES

• Total cars/LC/MC [phone]
  2008 2010 2015
• 2007 A 1844
  1654 1882 1713 2230
• Latest projection
  2057
• Total foreign 1009 1257
  1082 1013 1630
• Best Estimate
• Total
  2057 2100 2400 2600
• Total foreign
  1257 1300 1700 2000
• Locally produced foreign 415
  735 1118 1265
• Imported foreign
  807 565 582 735

29
Tiumen510.7 k people
Sales Volume 1540 2.7 mils
Sales Volume 1540 2.7 mils
30
Tiumen510.7 k people

• Sales Volume 1540
• 2.7 mils

31
Perm1000.1 k people
Sales Volume 2360 3.5 mils
32
Nizhny Novgorod1311.2 k people
Sales Volume 700 4.2 mils
33
Nizhny Novgorod1311.2 k people
Sales Volume 700 4.2 mils
34
Omsk1139 k people
Sales Volume 664 4.5 mils
35
Ekaterinburg1293 k people
Sales Volume 1171 5.0 mils
36

• 98 OF CUSTOMERS ARE NEW TO FORD
• UNIQUE OPPORTUNITY TO BUILD LOYALTY

37