Automobile Industry Market in St Petersburg and the Leningrad Region

For the period of January-March of this year, St Petersburg auto giants have produced 100 300 cars which made it 9% more than that of 1st quarter of 2012. However, the production volume has dropped by 12% (up to 30 000 cars) compared to May the last year. This decline was partly due to long public holidays that made the average number of work days roughly limited. Demand falling for cars manufactured in St Petersburg made the production fall, too. As a result, car factories went on changing their products line to prevent the overstocking.

Country-wide, however, automobile manufacturing in Russia has increased by 2% in 1st quarter of 2013 compared to that of the last year. The same is true for the Northwestern Federal District.

According to the Federal State Statistics Service, sales volumes in the 1st quarter of 2013 increased by 20% compared to January-March last year. There has been an increase by 14% in the Northwestern Federal District – reached by 41 % in St Petersburg. However, the Automobile Manufacturers Committee of European Business Association (EBA) report states that there was a decrease in sales volume by 12% (229 670 cars) on Russian car market in May. Compared to January-May 2012, too, production volume decrease in January-May 2013 rose by 4%. Experts say that the main reason for that is gradually falling demand for Russian cars.

4 international automobile manufactures – Toyota, General Motors, Nissan and Hyundai (Kia) – have their branch factories in St Petersburg. The production lining includes so far 11 models: Chevrolet Cruze, Opel Astra, Chevrolet Trailblazer, Nissan Teana, Nissan X-Trail, Nissan Murano, Infiniti FX, Infiniti M, Toyota Camry, Hyundai Solaris, Kia Rio.

Ford, too, has a plant in the Leningrad region. Its production lining stands for Focus and Mondeo. Symbolically enough – in January 2012, the plant’s 10 year anniversary, it produced its 500 thousandth car.

Fiat, although expected, has not opened a single plant in St Petersburg and the Leningrad region. In January 2012, Fiat and Sberbank made an agreement on initiating a joint manufacture with Sberbank holding 20% of bonds, and Italian giant gaining the rest of them.

Nissan revealed in May 2012 it is going to expand its business. It is going to increase the production volume by 100 000 cars a year by 2014. Complimentary investments, too, are expected to reach 6,7 bln. RUB. They will go on building 50 thousands m2 of assembly shops.

Toyota, too, is one of the many to expect business expansion in 2014. The company’s to-day agenda is to open new assembly shops, featured in cover panels stamping and plastic parts. The investments are estimated to reach 2,7 bln. RUB.

Meanwhile, the total production volume of all automobile manufacturers operating for St Petersburg and the Leningrad region is 550 000 cars a year. In 2012, the workload exceeded 91%. Hyundai is an absolute champion here, with holding 55% of all car production volumes in St Petersburg. This year the companies are going to reach the workload by 95%, up to 530 000 cars a year. There is a good chance to increase the production through rising exports to countries of Customs Union. The uncertainty and common concern about new markets, however, can negatively affect the increase of production volume.

The Russian market of mergers and acquisitions is reducing

In 2012 there has been a downward trend in the volume of transactions on the market of mergers and acquisitions (M & A). Compared to 2011 Russian investors decreased the number of transactions on purchase of assets of other companies by 27%, the volume of transactions has also decreased by 35%.

Among the reasons of such situation are financial instability on the global market and political uncertainty in Russia (the election of President of the Russian Federation and the opposition appearance influenced the cautious investors' decision).

Since 2007 dynamics of transactions number has a tendency to decrease. Slight growth was recorded only in 2010.

The largest transaction of the past year was the acquisition of Turkish bank Denizbank AS from Dexia by Sberbank. The transaction value amounted to USD 3.8 billion. For comparison, the most expensive deal of 2011 was a consolidation of Open Joint Stock Company Uralkali and "Silvinit" in May 2011. Its value amounted to 8.8 billion rubles. However, in Q1 2013 the deal surpassing of all transactions for the year 2012 in terms took place (purchase of TNK-BP by Rosneft for USD 54.98 billion). For comparison the total volume of transactions in the Russian M & A market in 2012 was about 1,550 billion rubles (about USD 50 billion).

It should be noted that due to the influence of the financial crisis in the Eurozone, the majority of the largest deals in 2012 was carried out in European countries and Turkey. Also it is known that investing in depreciating assets usually brings high return.

According to the Globas-i system, more than 40,000 companies ceased operations by merging / joining in 2012. In 2011 this figure was higher by 3.4%. In the current year, companies with such status were 31% of the value of 2012, which gives reason to anticipate a similar number of domestic mergers and acquisitions to the end of this year.

The current year tendency on the M & A market was the growing role of state-owned companies. In the Q1 2013 such companies made 9 deals. In April VTB continued this practice by Tele2 purchase for USD 3.5 billion, including debt.

Another feature of the Russian M & A market is rather high dependence on large transactions. For example, the deal with TNK-BP in March had 97% of the total amount of transactions for a month, and in the Q1 2013 the largest deals accounted to 90% of all transactions. Thus it can be concluded that the Russian market has a tendency to stable, but very slow growth.