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© RIA Novosti. Vladimir Pesnya

The end of Lada as we know it

by at 19/04/2012 21:31

As production of the infamous Lada Riva brand rolls to a halt, Russian car production giant AvtoVAZ is taking concrete steps toward ditching its image as the producer of the world’s most inefficient brand of car.

This week the firm officially launched production of a swanky new flagship model – the Lada Largus – an affordably priced family car designed for smoothly transporting big Russian families out to the dacha and back.

The only hitch is that the new car isn’t actually a Lada. It’s a Renault model, produced under a joint project between Avtovaz, Renault and Nissan, with a Lada symbol stuck on the back.

In fact the much-heralded launch marks the phasing out of traditional-style Lada cars, demand for which has plummeted since a cash-for-clunkers scheme set up during the crisis was drawn to an end. As well as the Riva, or Semyorka as it is popularly known in Russia, production of the Lada 2104 is also drawing to a close at the end of 2012.

“Basically the Largus car has taken nothing from Lada and everything from Renault,” Vyacheslav Subbotin, deputy editor-in-chief of popular Russian car magazine Za Rulem, told The Moscow News.

“The car is a transition step from traditional domestic Ladas to foreign cars. AvtoVAZ will use the Largus as a basis for developing technologies and collaborating with its foreign partners, and will move on to produce completely foreign models of Nissan and Renault.”

The new car is the first family car to be produced by the Tolyattibased company, and will be nearly identical to Renault’s Dacia Logan MCV model. It will be produced in two versions – a passenger station wagon with five or seven seats, and a two-seat cargo van.

In contrast to the basic interiors of the classic Lada models, the new car will be kitted out with air conditioning, safety bags, an ABS car stability system, and an MP3 player, according to an official press release.

The car is being produced in a full-cycle production unit, consisting of three new factory workshops. Official sales will start in May.

Attractive price

With prices starting at just 320,000 rubles ($10,800), the new car is around $700 cheaper than similar imported models on offer on the Russian market, which some analysts say will be its main selling point.

“We don’t yet know how Largus is going to function, but from the marketing point of view it is a good product,” said Andrei Tretelnikov, a car industry analyst at Rye, Man and Gor Securities. “None of the other models of this class is this cheap in Russia, so it may be very competitive.”

Others, however, are skeptical about how the new model will be perceived on the Russian market.

“The car is aimed at people who have dachas, or those who run small businesses, but it’s too big for daily use and won’t be vastly popular,” said Subbotin, of Za Rulyom magazine.

AvtoVAZ is aiming to roll out some 27,000 cars in 2012, mainly station wagons, with a view of reaching production volumes of 70,000 vehicles annually in the next few years.

WTO concerns

Under the new joint project with Renault and Nissan, AvtoVAZ plans to invest some 169 billion rubles ($5.7 billion) in the creation of new models and modernization of existing production capacities. The company aims to boost its share of the domestic car market to 40 percent from around 20 percent and eventually enter foreign markets – firstly Latin America and later the Middle East.

The Russian car industry is often accused of abusing state support in order to compete with imported cars. Many industry experts say that setting up joint production with foreign automobile giants will be the only way for the domestic industry to survive Russia’s entry to the World Trade Organization this summer.

“The approaching WTO accession has brought more activity to the market. More and more foreign players are coming to work at Russian production platforms so partnerships are the right strategy to make Russian producers efficient within seven-year adjustment period.”

Read other articles of the print issue "The Moscow News #29"
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