OREANDA-NEWS. July 17, 2009. It would be interesting to know what common people associate the beginning of the third millennium with. Maybe, it is the launch of the world biggest elementary particle accelerator (hadron collider), or provocative Shanghai international motor show, or even discussions around new fashion for hybrid cars? One thing is clear: the first place in the rating named “the main thing I’m worried about” is taken by the world economic. depression. Mass media remembers us about it constantly and in this concern automobile industry is not left apart. In order to help readers be objectively informed “Avtoolam” magazine offers its readers a series of articles about the ways to overcome the economic depression. Such action may appear as a so-called “positive injection of the media”. Today’s introduction will be totally devoted to the situation of our foreign dealers who are engaged in promotion of our cars in Russia and other CIS countries. In particular, we are going to talk about a well-known automobile brand Uz-Daewoo.

The Russian representative office of Uz-Daewoo, located in Moscow, supervises the work of 5 biggest distributors in St. Petersburg, Saratov, Yekaterinburg, Ufa and Tyumen. Moreover, the representative office has united the distributors of Azerbaijan, Kazakhstan, Moldavia, Ukraine, Belorussia, Turkmenistan and Kirgizstan into one system that has common standards. In 2009 distributors from Georgia and Armenia joined them as well. The company officials are sure that within hard economic conditions, such a large-scale consolidation of distribution networks into a corporate system is the only right decision. The system is based on the unified rules in order to streamline both the sales and maintenance service. The system is intended to improve the efficiency of all business-processes and increase the level of service.
 
For several months, the world’s automobile industry has been bringing us mainly negative news. In particular, a dramatic fall in cars’ sales within the CIS countries has been noticed. The reasons
are the following:

- devaluation of national currencies;

- rise of import tax;

- impossibility for banks to issue cheap car loans;

- extensive decrease in people’s purchasing capacity;

- everybody’s expectation of situation’s further deterioration.

Thus, the factors mentioned above have resulted in cars’ short-term price increase. At the same time, according to the report of Russian Statistics Agency, almost 42% of responders expect their circumstances to reduce. The percentage of people who saved their money up has decreased in 2,6 times (from 39,5% to 15,1%). The consumers’ behavioral model demonstrates a visible shift of consumption and savings into the field of essential commodities. Taking into account the research, consumer prices in Russia have been decreased down to 7% since spring 2009.

In addition, we should mention about cars’ credit sale (the percentage of such cars in total company’s sales before depression has reached up to 40%). Since September 2008 banks have essentially increased credit rates and toughened the requirements to borrowers. Traditionally, car-credits programme had high credit rate (up to 25%). As a result, the percentage of cars sold in credit has fallen dramatically. The income of the potential borrowers has decreased and now they avoid long-term requirements on credits at such high interest.

On the other hand, the percentage of consumers who are able to buy a car for cash has also fallen considerably. To improve the situation, special credit programmes, initiated by car-manufacturers, have been arranged.. Thus, the Russian representative office of Uz-Daewoo in cooperation with such banks as VTB24 and SOBINBANK have worked out a number of programmes under Uz-Daewoo-Finance-project. The programmes came into effect in May, 2009.
 
Despite the objective hardships at the market, Uz-Daewoo cars took the tenth line in the list of best-sold foreign cars in Russia in 2009. In March of the same year, Nexia took the fourth place among the most popular car models and Matiz took the fifth. In total, according to the reports on cars-selling for the first quarter of the year, Matiz became the most popular car model among cars of A category.

As to marketing activities, which are of great popularity among car-manufacturers, we need to make some remarks. In the conditions of nonprice competition the attention is first of all paid at consumer properties and service level. Nowadays, promotion activities are especially topical because of the economic depression. Campaigns like this help people save money by offering different discounts and respites. The population’s purchasing capacity falls and the consumer thinks over each offer thoroughly before making a big purchase, he tries to find the optimal balance between price and quality. 

This is the reason why Russian representative office of Uz-Daewoo, in fact, the first among car-manufacturers, arranged the all-Russian action “Matiz as a gift” in April-May, 2009. The official dealers of Uz-Daewoo in Russia took part in the project. The same actions have already taken place in Europe and the USA. Recently, the dealers of Subaru, Dodge and Kia have started using the similar method of sale especially actively.

It is notable that the previous actions promoting Uz-Daewoo (for example, New Year’s Miracle, Hot Discounts, Big Thousands), which have been taking place during last several years, doubled the sales. In 2006, Hot Discounts offered a 10% discount for buying a car. There have not been alike precedents at that time yet. Except for increase in sales, another important result of the actions is in widening buyers’ awareness about the brand, improvement of loyalty, opportunity to get the consumers’ direct response.

Nexia and Matiz, which are manufactured by Uz-Daewoo, are usually considered to have better “price-quality” balance if compared with other foreign cars imported to Russia. Nexia’s engines meet EURO 3 ecostandard. Matiz, which is oriented for driving in the city is compact, comfortable and profit-proved. The fuel consumption, if the car is driven in the city, makes 7,4 liters/100 km. The competitive ability of Uz-Daewoo cars is formed by the mentioned consumer qualities and their reasonable price.

In accordance with the evaluations made by the company’s experts, one of the most problematic markets is considered to be the Ukraine. There are a lot of reasons for it. Firstly, 90% of banks do not issue loans for buying cars. The other banks offer the borrowers unacceptable terms of crediting (the interest rate makes 25-30% per annum, the initial instalment is overstated for 30-50%, non-repeat commission is a must etc.). As a result, sales volume has fallen dramatically. Secondly, national currency’s devaluation has led to the decrease of effective demand for cars. And finally, the rise of customs duty has resulted in rise of imported cars manufactured in 2009.
 
The factors mentioned above have caused the decline of the Ukraine’s car market down to 57% in April, 2009. In this connection Uz-Daewoo is intended to make some arrangements in the Ukraine to overcome economic crisis and improve demand. For instance, the company is going to widen the official dealers’ network, introduce special crediting programmes (before economic depression the percentage of credited cars at Ukrain’s market reached up to 70%), programmes on leasing and service. Thus, the positions of Uz-Daewoo at the Ukraine’s market are going to be reinforced.

Nowadays, the cars, manufactured by Uz-Daewoo, are sold in 9 countries of CIS: Russia, Moldavia, the Ukraine, Belorussia, Kazakhstan, Kirgizstan, Armenia, and Azerbaijan. It is evident that these regions may become not only perspective markets for selling Nexia and Matiz but also a real base for development and promotion of Uz-Daewoo as a popular transnational brand.