Is there quicksand in the US?

Steyr-Werk: Russian carmaker Gaz is in the quicksand of the US sanctions

Spring brings good news: Auto sales in Russia soared in April compared to last year. According to the Association of European Business (AEB), car dealers sold 151,964 new cars, 290 percent more than in April 2020.

But Thomas Sterzel, the head of the AEB's automotive committee, is not euphoric in view of the figures, after all, last year’s result was massively affected by a rigorous lockdown at this time. "Overall, sales in the first four months amounted to 515,934 new vehicles, which - as expected - is 24.3 percent above the result for 2020, but also 4.5 percent below the result for 2019," said Sterzel.

Off to the Russian market

The big car manufacturers once gave full throttle to enter the Russian market, after all, the Kremlin had created incentives for localization of production early on with protective measures. Toyota, VW, Ford, Renault or General Motors. They all came to set up their own production facilities from St. Petersburg to Kaluga and Togliatti to Vladivostok.

The Moscow Motor Show competed with the established events in Frankfurt and Geneva. During his visit to the trade fair in Moscow in 2008, the then head of the German Association of the Automotive Industry, Matthias Wissmann, predicted that Russia would soon be the most important market in Europe with sales of just under 3.5 million new vehicles. The prediction should never come true. Most recently, 1.6 million (2017), 1.8 million (2018), 1.76 million (2019) and now 1.6 million new vehicles were sold in Russia.

This year the AEB predicts a slight growth of 2.1 percent - far away from former dream destinations. The market is struggling with the steady devaluation of the ruble and the real income of citizens, which has been falling for years.

Wolf as a modernizer

Oleg Deripaska's Gaz concern is also struggling with the crisis. Last year, sales of small vans fell by 20 percent to 51,169 vehicles. Logical, because in view of the crisis, the need for commercial vehicles was also low.

The group from Nizhny Novgorod, under the leadership of CEO Siegfried Wolf, can certainly point to a successful modernization and refocusing over the past ten years. The car manufacturer, once known as the Volga forge, has now established itself as a manufacturer of commercial vehicles, buses, trucks and, above all, small vans of the Gazelle brand. The gazelle is not only sold in Russia, but also exported to the CIS, North Africa and South America.

Second mainstay

In addition, Wolf has given the group a second pillar with the assembly of other car brands. The cooperation with VW was particularly successful. Various VW and Škoda models have been screwed together in Nizhny Novgorod since 2011. A planned even closer dovetailing - at times there was talk of VW's entry - failed due to the sanctions imposed by the US on the Kremlin-affiliated billionaire Deripaska in 2018, which also affect his participation in Gaz.

Gaz has been on the blacklist of the US Treasury Department's Foreign Assets Control Office (OFAC) for three years. Since then, the sanction threats have hung like a heavy block on Gaz's leg, because they potentially prevent other companies from working with the group. The implementation of these sanctions is being postponed again and again - the current grace period is valid until January 2022 - but international cooperation is being massively made more difficult for Gaz. Suppliers and banks that work with Gaz also risk fines. Daimler has therefore already ended its cooperation with Gaz.

Accountability

OFAC asks Deripaska to surrender control. The company now has to give a monthly account of the fact that it is not active in Deripaska's name or for other Russian oligarchs on the sanctions list. The Austrian-loving Russian has given up the operational management, but the planned sale has not yet worked out. So the group does not get anywhere either. Deripaska, however, hopes that the US sanctions against Russia will be toned down in the next two years, as he forecast on Thursday. He would be one of the greatest profiteers. (André Ballin from Moscow, May 14, 2021)