Article

 

Restructuring and competition in the car industry in Russia : conglomerate control vs cooperation with foreign firms (p.263-286)

by

Xavier Richet, CIEH, University La Sorbonne Nouvelle (Paris)

Keywords : Transition, car industry, restructuring, competition, industrial cooperation, vertical integration, and foreign direct investment

JEL classification : D2, F2, L2, M2, P2

Abstract

This paper presents the state of industrial restructuring of the car industry in Russia and analyses the strategy of the main actors in the sector. The three main ones being; Russian industrial groups, foreign multinational corporations willing to enter into the market, and thirdly, the Russian government which has to decide between supporting its national industry and, or, opening the market to world competitors. In other transition economies, foreign direct investments have played a major role in controlling this strategic sector. This took the form of acquisition or greenfield investments; FDI forcing local governments to implement the rule of law and clear property rights. On the contrary, in Russia the transformation of the car industry is following another path. FDI cannot take strategic stakes in the car industry while the government and carmakers have an ambivalent position concerning the presence of foreign companies. On the one hand, the presence of FDI could help to restructure and to fill the technological gap. On the other hand, the shock of industrial restructuring and its social, economic and regional issues could be damaging, leaving aside the question of the control of strategic assets. Recently, big financial and industrial conglomerates have started to move in this sector and started restructuring. This left foreign competitors on the edge of the market with a limited choice of action; either to cooperate on some segments of production, or start greenfield investments, this in a difficult environment where almost everything had to be built from scrape.