Year after year, the Russian automotive market continues to steadily record rapid growth. Total market demand for passenger cars is expected to grow from 1.6 millions cars in 2007 to 2.7 million in 2017. Today, Russia is the third largest market for Mitsubishi Motors Corporation (MMC) after Japan and the U.S., and soon, it is expected to even overtake the U.S. to become MMC’s No. 1 overseas market. As people’s incomes grow, demand for cars is increasing, especially for imported cars or locally assembled foreign brand cars. Total sales of MMC cars in 2007 are expected to reach 100,000 units and MMC will target sales of 140,000 cars in 2008.
In light of this growth, the major missions of the Moscow Office Motor Vehicle Department is to serve as a base for market intelligence that facilitates sound communication among business parties and fosters a good understanding of the rapidly changing market situation, and to assist with the creation of new business schemes, where Mitsubishi Corporation (MC) can adapt its role to expand the business as the Russian market continues to grow.
MC’s automotive business in Russia started in 1992 with import financing for MMC cars provided to Rolf-the first Mitsubishi dealer in Russia then, and today, one of our most important strategic business partners. New projects are being discussed with Rolf as we seek to achieve further sustainable business expansion.
Another important component of our automobile business was the distribution of Hyundai cars in Russia from 2002 through the middle of 2007. MC exited from this business this year as Hyundai Motor Company sought to take a more hands-on role in the market, but this business produced substantial profits and also provided our department with invaluable experience that will certainly contribute to future business development.
Russia is an immense country. Stretching from Asia in the east to Europe in the west, it is 45 times larger than Japan and close to twice the size of the U.S. The nation’s rich history and contributions to the arts are matched only by the magnitude of its natural landscape. Russia’s arts are world renowned, and the Bolshoi Theatre, with a history spanning two centuries, has touched countless people with its superb opera and ballet.
Russia’s economy has grown rapidly since 1999, with real GDP rising at a high rate of 6 to 8%. The driving force behind this growth has been the nation’s rich natural resources and its emerging consumer market. Russia produces as much oil as Saudi Arabia and it boasts far more reserves of natural gas than any other country in the world. Nearly one-third of Europe’s electricity is generated using Russian natural gas. On top of this, Russia is also a leading producer of metals, lumber and marine products.
With a strong economy backed by abundant natural resources, Russia has a growing, relatively wealthy middle class, which is supporting strong growth in demand for consumer goods. While Russia has the smallest population of the four BRIC nations, the wealth being generated from natural resources has now begun to reach ordinary citizens, especially in urban areas. At the same time, Russians have started to embrace the joy of shopping. These factors have combined to drive the growth of the market for consumer goods.
MC’s traditional approach to business in Russia has been rather simple. We have purchased natural resources from Russia for sale through our network and have also supplied various goods needed by Russian customers. However, we cannot hope to succeed in today’s rapidly changing Russian market based solely on this kind of approach. Indeed, we must transform our business models. In the resource field, for example, it is imperative that we get further involved in project development. In short, a more aggressive approach to business, whereby we play more of a leading role, is essential throughout our business here. We are therefore implementing three strategies to create such business models in Russia.
The first of these strategies is to become involved in projects that allow us to fully leverage MC’s far-reaching capabilities. The idea is to utilize our various functions to provide comprehensive services matched to the needs of customers and then participate in projects together with these customers. The second strategy is to have greater involvement within the Russian domestic market. In the consumer goods business, for example, our aim is to bolster our position in markets by building value chains locally. Finally, the third strategy is to take on risk in a measured way. We will demonstrate a penchant for taking on risk, after duly conducting detailed analysis of the risk we are facing.
As we work to incorporate these three strategies and augment our business models in each sector, we are making steady progress toward greatly advancing MC’s business in Russia, both quantitatively and qualitatively.
When visiting Moscow, why don’t you squeeze in some time between meetings and flights for a little sightseeing? We have plenty to show you, even if you arrive early in the morning and leave on the same day. Highlights include ancient cathedrals, panoramic views of Moscow from University Hill, unique souvenirs, and of course, Red Square!
The latest hot spot is an architectural and park ensemble called Tsaritsyno. Located 17 kilometers south of the Kremlin, this scenic oasis features the Gothic style residence of Catherine the Great along with beautiful palace grounds. Restoration work on Tsaritsyno was completed this autumn, and it has become a real gift to Moscow residents looking to escape the bustle of urban life. Remarkable places like Tsaritsyno will leave you in awe, whether you visit Russia during snow-covered winter or gold-glistening summer.
Through its Moscow Office, MC has long been a member of Russia’s Foreign Investment Advisory Council (FIAC). Initiated by the Russian government and a group of foreign investors in 1994, FIAC seeks to promote a positive investment climate in Russia.
In 2007, FIAC polled 106 foreign investors and 51 potential investors about the investment climate in Russia through its annual opinion survey. Survey results show that some 82% of investors are satisfied with their decision to invest in Russia, including a robust 56% reporting a high level of satisfaction. The results also indicate that current investors have a more positive outlook on Russia’s economy than potential investors, who lack first-hand experience here. Current investors cite increasing consumer purchasing power, growing GDP and a skilled, well-educated workforce as Russia’s economic strengths. In order to capitalize on such strengths, the Moscow Office has been spearheading efforts to promote MC's growing involvement in this country of great opportunity.
In Russia, the interest in all things Japanese is as strong as ever and not just limited to kimonos, sushi bars, karaoke and tea ceremony. Today, this interest is also manifesting itself in people’s homes. More Russians are embracing Japanese-style interior design for the feeling of comfort, tranquility and elegance it provides. While Russian homes tend to be filled with furniture, textiles, and ornate decorations, a Japanese home seems almost empty in comparison. Japanese interior design is not about adding extra items to the room. Instead, the goal is to minimize distractions and allow the beauty of the building itself to shine. There are plenty of companies today that provide reasonably priced Japanese-style design solutions, helping Russians to make their homes unique.
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