Bloomberg News

Ford Bets on SUVs to Revive Russia Demand After Sales Drop (1)

October 15, 2013

Ford Motor Co. (F:US) is counting on new sport-utility vehicles to revive sales in Russia after a contraction in demand for sedans propelled a delivery drop, the head of the U.S. carmaker’s European operations said.

Ford, which makes the Focus compact and mid-sized Mondeo at a plant in Russia’s Leningrad region, posted a 19 percent plunge in nine-month sales in the country, more than double the 7 percent industrywide drop in the period, according to Association of European Businesses figures. The company’s local joint venture with OAO Sollers outlined plans yesterday to build the EcoSport SUV and Edge crossover next year.

“It’s been a very quick shift from the vehicles which were successful historically,” such as the Focus, Stephen Odell, president of Ford’s European, Middle Eastern and African business, said in an interview in Moscow late yesterday. “The segment which is growing in Russia is sport-utility vehicles. It’s fashionable to have SUVs.”

The partnership between Dearborn, Michigan-based Ford and Sollers took over the U.S. company’s car plant in Vsevolozsk and builds models including the Explorer SUV and Kuga crossover in Elabuga in the Russian republic of Tatarstan. The Edge will be produced at another plant in Naberezhnye Chelny, also in Tatarstan, the companies said yesterday.

‘Balanced’ Strategy

Ford operates under a 50-50 joint venture “because we thought it was important to have balanced equity and balanced growth in the business,” Odell said.

With the addition of the EcoSport and the Edge, an offroader between the full-size Explorer and more compact Kuga, “we’ll have a complete portfolio of products in the growing SUV segment, actually way faster than you would’ve thought we’d be able to respond,” Odell said.

Russia’s car market will probably amount to about 2.8 million vehicles this year, versus projections exceeding 3 million units at the beginning of the year, Odell said, declining to specify forecasts for Ford.

Russia’s gross domestic product expansion slowed to 1.2 percent in the second quarter from 3.4 percent last year.

“GDP may not grow as fast as you like, but it’s still a strong economy,” Odell said. Russia has the opportunity to surpass Germany as Europe’s largest car market in the middle of this decade, he said.

SUVs are winning buyers as snowy Russian weather and road conditions make the models’ higher clearance useful, Odell said. The vehicles’ seats are also higher than those for standard cars, making them more attractive to drivers, he said.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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