Russian lorries roving about Asia

24/ 04/ 2006

Moscow, (RIA Novosti political commentator Alexander Yurov) The Russian
motor vehicle industry is definitely on the upsurge.

There are now 250 cars per 1,000 people, and estimated to be 550 by 2025.
Indicatively, this will be largely due to exports of cars from abroad, and a
shift to full-scale assembly of foreign cars on Russian territory. Russians
will no doubt gradually replace their classic models with late model foreign
cars. But the backbone of the Russian vehicle industry - lorries - will
remain Russian. Lorry manufacturers are not going to yield their positions
on the roads of Russia.

In the Soviet Union car manufacturing was a by-product for many years. It's
been only in the last 30-40 years that major car producers, AZLK and VAZ,
started to develop. Alas, they made no breakthroughs. But the manufacture of
heavy-duty lorries has always been distinctive and even unique. The first
plants appeared in the beginning of the 20th century. Now five big
industrial companies manufacture lorries. Up to now lorries account for more
than 50% of all vehicles on the Russian roads.

This unusual situation affects the industry's strategic priorities as well.
Lorry manufacturers do not have to compete with foreign models, and are
closely watching the foreign markets, especially in Asia.

At the Moscow Motor Show-2005 the Ural plant (part of RusPromAvto on a par
with GAZ and other major motor vehicle plants), and the Indian Ural-India
Ltd. signed an agreement on launching a plant to assemble lorries in India.
About $10 million will go into its construction, and it is expected to start
operations in late 2005. A Russian-Indian joint venture was set up for this
project.

For the time being, the project is rather modest, and will not flood the
Indian market will Ural lorries. Only 90 unassembled lorry kits and
ready-made units will have been transported to India in 2005. It is planned
that the Ural plant will deliver up to 1,000 kits a year, as well as chassis
for fire engines and dumping lorries. The Ural plant, Indian Ural India
Ltd., West Bengal Development Corporation and other Indian investors are
expected to put 100 million U.S. dollars into the project. Ural spokesperson
Svetlana Pakhtusova said that work on the Russian-Indian contract is in full
swing. The construction of the Haldia assembly plant is almost completed,
and its inauguration is planned for the middle of next January.

RusPromAvto director of foreign contacts Vladimir Torin said that the
vehicles produced by the holding's plants are very popular in Asian markets.
Moreover, the task of enhancing exports to Asia and Africa is part of the
group's strategic plan.

In June 2005, the top management of the Gorky GAZ Automobile Plant conducted
negotiations with the Indian Vectra company. GAZ' press service reported
that the company was considering the Vectra offer concerning taking part in
a tender on deliveries to the Indian army. India is interested in a
right-hand-driven version of the HMWV Tiger.

The Tiger is an armored vehicle with five-grade protection. Its sidewalls
have portholes; the roof has two hatches, and the crew salon

has a place for a radio station and an interlocking device to neutralize
radio-controlled explosives. The vehicle has a turbo diesel, and a six-gear
power train. It is designed for transportation and use in counter-terrorist
operations, as well as territorial defense, including border protection.

KAMAZ is another heavy-duty lorry, which regularly demonstrates its
excellent qualities at all kinds of rallies. These lorries are well known in
Asia. The first deliveries to Vietnam date back to 1979. Now Vietnam buys up
to 5,000 KAMAZ lorries a year. Today, Russian motor vehicles account for one
third of the country's lorry fleet. In new lorry models, the share of KAMAZ
has already reached 74%.

The Vietnamese plant is still developing, but it has ambitious plans. One of
the priorities is conquering neighboring markets in Laos and Cambodia. These
countries already have KAMAZ fleets but regular deliveries have not yet
commenced.

Russian interests are not limited to just Indochina. Rosoboronexport
(exporter of Russian military hardware abroad) is actively promoting Russian
motor vehicles in Asia and Africa. Its Director-General Sergey Chemezov
spoke about plans to deliver 500 KAMAZ four-wheel drive lorries to Yemen.
They were also shown in Morocco with the prospect of a contract for 200
vehicles. A total of 250 lorries will be delivered to Afghanistan, and 11 to
Djibouti. Rosoboronexport hopes to have contracts for deliveries to Iraq and
Bangladesh.

Chemezov also reported that in 2004 Bahrain received 40 lorries worth $1.1
million, and the Qatar Defense Ministry acquired 500 KAMAZ lorries for a
total of $20.1 million. In 2005, contracts for the delivery of KAMAZ lorries
were signed with the Defense Ministry of South Africa. All in all, this
country may order 800 lorries. Rosoboronexport also plans to have contracts
with the Indian Ministry of Defense. One of them is a KAMAZ assembly plant,
involving the TATA infrastructure.

In addition, Tata Motors Limited is considering an opportunity to
manufacture its Tata Indigo model in the Maritime Territory. The territorial
governor's press service reported, that Tata Motors representatives signed a
memo of understanding after the talks with the Mayor of Arsenyev, Vladimir
Bespalov, and the directors of Askold and Progress enterprises in the
Maritime Territory. Negotiations will be completed in six to eight months.

Tata Motors already has three assembly plants in Russia: for lorries at
Avtomobili i motory Urala (Autos and Motors of the Urals), for buses at the
Volograd Volzhanin plant, as well as for the Kerzhenets and Moskoviya buses
and pickups at the Nizny Novgorod Samotlor. Tata Motors is India's biggest
and the world's fifth largest producer of commercial motor vehicles. It
manufactures 400,000-450,000 cars and lorries of 135 models a year.

There are many more examples of active cooperation between Russian and
Indian companies. Nizhny Novgorod GAZ, for instance, started assembling and
selling cross-country Marshals of the Indian Mahindra & Mahindra.

Deputy Director of the Russkiye Machiny (Russian Autos) Trading House Viktor
Maslennikov said that the assembly of Marshals and the training of employees
started in October. He said that the plan provides for the assembly of 100
cross-country vehicles before the end of the year. Marshals will have a
price tag of $20,000-$23,000 and be sold in Nizhny Novgorod, Moscow, St.
Petersburg and Rostov-on-Don. After a market test GAZ will review a
possibility of assembling Marshals, and make a decision by the spring of
2006.