G LOBAL A UTOMOTIVE C ENTER M ARCH 2005

The Russian Automotive Market

Industry Overview

Contents
Opening Comments Automotive Production in Russia The Passenger Car Market The Bus Market The Truck Market Russia Within the Global Automotive Market Foreign Brands Produced in Russia Foreign Car Sales Consumer Trends & Prospects Government Reforms Ernst & Youngs Involvment in the Automotive Industry Solutions for the Issues that Matter Global Automotive Center Contacts in Russia 2 3 3 6 7 8 11 14 18 20 24 24 26 28

O P E N I NG C OMMENTS

Opening Comments
Russia belongs to the fastest growing emerging automotive markets. While demand for quality new vehicles in the country continues to surpass optimistic forecasts, domestic manufacturers are heading towards saturation of production capacity. But car consumers are more selective and price sensitive than ever. Attractive automotive credit conditions, competitive warranty packages, and comfortable after sales service now belong to the basic toolset of any foreign car dealer striving for success throughout the country. In this report we present key market indicators gathered over the last three years. This is just a glimpse of what we can do for you while you consider market entry or expansion of business activities in Russia. We hope you find the following information insightful, and welcome you to share your most challenging questions on this exciting business environment with us.

Emmanuel Quidet Partner Head of the Industrial Products Group

T H E R US S I A N A U TOM O T I V E M A R K E T

Automotive Production in Russia

The Passenger Car Market
The Russian passenger car market is estimated at 1.76 million vehicles in 2004, up 10.5 percent year on year1. While the import of used cars accounts for less then 20 percent of overall consumption, the production of foreign car makers more than tripled, to over 133,000 units, which represents 7.5 percent of overall Russian car market in 2004. Passenger Car Market Compared
2004 2003 2002

18.0%

24.4%

29.2%

19.1%

55.4% 12.3%

59.9% 6.9% 0.7% Import New Cars

63.1%

7.5% 3.4% Russian Production Foreign Production*

Import Used Cars

Source: ASM Holding, Autoreview, Autoizvestia, Ernst & Young estimates * Includes production by foreign legal entities, joint ventures, and production by Russian entities with foreign assembly licenes

1 Includes

overall import and domestic production figures. In 2004, approximately 110,000 cars produced in Russia were exported to other emerging markets.

A U TOM O T I V E P RO D U C T I ON I N R US S I A

Despite strong growth in new car imports, Russias car production in 2004 rose almost 10 percent compared to the previous year. Taken on its own, production by Russian manufacturers rose 2.1 percent to over 976,000 units2. Currently, Russias automotive production capacity runs at approximately 90 percent of overall production capacity.

Russian car prices soared by 15 percent on average in 2004, matching base prices of several of the foreign models sold in Russia, some of which are now produced in the country.

Passenger Car Production 20022004 (units)

Company City 2004 717,985 82,687 65,686 57,737 41,207 31,136 30,000 29,703 14,525 39,292 1,109,958 2003 699,889 78,497 56,783 21,839 40,016 32,748 5,896 16,261 8,415 49,684 1,010,028 2002 703,040 65,751 65,648 323 38,743 33,648 2,490 2,474 5,713 62,231 980,061 2003/2004 Change in % 2.6 5.3 15.7 164.4 3.0 -4.9 408.8 82.7 72.6 -20.9 9.9 2002/2003 Change in % -0.4 19.4 -13.5 6,661.3 3.3 -2.7 136.8 557.3 47.3 -20.2 3.1

AvtoVAZ Togliatti IZH-Avto Izhevsk GAZ Nizhny Novgorod GM-AvtoVAZ Togliatti KamAZ Naberezhny Chelny UAZ Ulyanovsk TagAZ Taganrog Ford Motor Co. Vsevolozhsk Avtotor Kaliningrad Others TOTAL Source: ASM Holding

2 Does

not include Chevy Niva and Viva production.

T H E R US S I A N A U TOM O T I V E M A R K E T

Passenger Car Production in Russia 19942004

Units 1,200,000
1,020,515 1,009,585

1,000,000
985,284 835,104 839,487

600,000 400,000 200,000 0

1994

797,924

800,000

1995

1996

867,693

1997

1998

1999

954,381

2000

968,092

2001

2002

980,061

2003

2004

Source: ASM Holding

1,103,852

A U TOM O T I V E P RO D U C T I ON I N R US S I A

The Bus Market

Bus production in Russia remained practically unchanged in 2004 compared to the previous year, in which clear growth was tangible in the larger bus segments (city, intercity buses). The minibus sector, which account on its own for approximately 50 percent of total Russian bus output, went down over 15 percent. Scania-Peter, the only foreign bus producer in Russia, raised production to 147 Intercity buses, a growth of 56 percent compared to 2003.

Bus Production 20022004 (units)*

Company City 2004 31,522 17,037 12,114 2,073 1,844 968 664 147 104 9,736 76,209 2003 36,299 21,553 11,323 1,607 1,674 726 544 94 129 2,629 76,578 2002 32,229 18,898 10,358 1,239 1,561 481 683 28 61 1,770 67,308 2003/2004 Change in % -13.2 -21.0 7.0 29.0 10.2 33.3 22.1 56.4 -19.4 270.3 -0.5 2002/2003 Change in % 12.6 14.0 9.3 29.7 7.2 50.9 -20.4 235.7 111.5 48.5 13.8

GAZ Nizhny Novgorod UAZ Ulyanovsk PAZ Pavlovo KAvZ Kurgan LiAZ Likino NefAZ Neftekamsk RUSIKAR (Tushino-Avto) Moscow Scania-Peter Saint Petersburg GolAZ Golitsino Others TOTAL Source: ASM Holding *Includes production of minibuses

T H E R US S I A N A U TOM O T I V E M A R K E T

The Truck Market

Truck production in Russia went up 3.9 percent year on year to over 202,200 units. The light truck segment accounts for approximately 80 percent of overall truck production, with GAZ as the leading manufacturer. KAMAZ, holding the strongest market share in the heavy truck segment, raised output by 20.7 percent year on year to over 29,200 vehicles in 2004. Truck Production 20022004 (units)*
Company GAZ KAMAZ UAZ IZH-Avto AMO ZIL UralAZ Others TOTAL City Nizhny Novgorod Naberezhny Chelny Ulyanovsk Izhevsk Moscow Miass 2004 117,043 29,243 18,528 13,810 12,867 6,826 3,895 202,212 2003 108,317 24,228 22,596 15,717 13,061 5,994 4,638 194,551 2002 100,258 20,055 16,934 12,485 11,810 8,589 4,119 174,250 2003/2004 Change in % 8.1 20.7 -18.0 -12.1 -1.5 13.9 -16.0 3.9 2002/2003 Change in % 8.0 20.8 33.4 25.9 10.6 -30.2 12.6 11.7

Source: ASM Holding *Includes production of light trucks

R US S I A W I T H I N T H E G LO B A L A U TOM O T I V E M A R K E T

Russia Within the Global Automotive Market

According to the World Bank, Russias car fleet per 1,000 people stands at 147. However, Moscow alone, with over 10 million inhabitants, has approximately 260 cars per 1,000 people, which is slightly higher than the Polish car density per 1,000 people. Russias automotive industry is still highly vertically integrated. The countrys most urgent concern is to create an attractive investment climate for foreign suppliers while protecting the Russian supplier industry, which is currently undergoing significant changes.

Almost 50 percent of Russias car fleet is over ten years of age.

GNI per Capita (US$) vs. Passenger Cars (per 1,000 people)
40,000
USA

Gross National Income (GNI) per Capita (US$)

35,000
Denmark

30,000
UK

25,000 20,000 15,000

South Korea Ireland

Austria Finland France Spain Germany Italy

10,000
Mexico

5,000
China

Argentina

Hungary

Poland

Czech Republic Estonia

Turkey

Brasil

0 0

Russia
150 200

Slovakia Moscow

India

50

100

250

300

350

400

450

500

550

Passenger Cars (per 1,000 people) Source: World Bank, The Little Green Book 2004, Atlas Method, Ernst & Young estimates

T H E R US S I A N A U TOM O T I V E M A R K E T

Suppliers Worldwide Manufactoring Involvement in Emerging Markets

Brand Borg Warner Bosch Cummins Delphi Eaton Faurecia Hella Lear Tenneco Valeo Visteon Main Product Range Powertrain Components Automotive Equipment Engines Integrated Systems and Modules Fluid Power and Electrical Systems Modules for Light Vehicules Lighting, Electronics Automotive Interior Solutions Exhaust Systems Engines and Engines Parts Modules and Components Brazil China India Mexico Poland Russia Thailand

Johnson Controls Seats, Interior Trim, Batteries

* Technical assistance Source: Ernst & Young, companys own data

The 15 Largest Vehicle Producing Countries*

Country USA Japan China Germany South Korea France Spain Canada UK Brasil Mexico India Russia Italy Thailand Production Production in 2004 in 2003 12.15 9.91 5.34 4.94 3.62 3.61 2.83 2.62 1.87 1.77 1.41 1.41 1.21 1.19 0.95 11.84 9.99 4.01 5.02 3.12 3.56 2.96 2.52 1.83 1.60 1.50 1.02 1.17 1.29 0.74 Change in % 2.6% -0.8% 33.2% -1.6% 16.0% 1.4% -4.4% 4.0% 2.2% 10.6% -6.0% 38.2% 3.4% -7.8% 28.4%

While international suppliers learn how to adapt to the needs of smaller markets in order to remain competitive within the global automotive environment, Russian suppliers must improve quality and productivity, and adapt to the needs of those foreign OEMs with current or planned manufacturing activities in Russia. This context raises the possibility of potential cooperation agreements in Russias automotive industry.

* Production in millions Source: OE Industry Review 2004, J.D. Power and Associates

R US S I A W I T H I N T H E G LO B A L A U TOM O T I V E M A R K E T

OEMs Worldwide Involvement in Emerging Markets

Brasil BMW Group BMW DaimlerChrysler Chrysler Mercedes Mitsubishi Fiat Group Fiat IVECO Ford Group Ford Mazda Volvo GM Group GM Daewoo* Opel Subaru Suzuki Honda Group Honda Hyundai Group Hyundai Kia PSA Group Citroen Peugeot Renault-Nissan Nissan Renault Toyota Group Toyota VAG Audi Skoda VW China India Mexico Poland Russia Thailand

Source: company's own data, Ernst & Young * As of January 1, 2005 all Daewoo cars exported by GM-Daewoo are branded as Chevrolet. The Daewoo brand name is allowed to be used only in South Korea, Poland, Romania, and Uzbekistan.

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T H E R US S I A N A U TOM O T I V E M A R K E T

Foreign Brands Produced in Russia

Avtoframos
Company Profile Established: 1997 Location: Moscow Targeted production capacity: 120,000 Type of investment: JV brownfield Planned production: Renault Logan * Production cancelled Total production 517 Symbol* Model Production Begin Renault 1998 Production in 2004 517

AVTOTOR
Company Profile Established: 1997 Production capacity: 60,000 (2 plants) Type of investment: 100% brownfield Planned production: BMW 3-Series (E-90) Rio Sportage Magentis Carnival K2700 II/ 3000S/ 3600 II* BMW 5-Series (E-60) 3-Series (E-46) 7-Series (E-65)* Chevrolet Tahoe Trail Blazer HUMMER H2 Total production * Production cancelled 2004 122 122 14,648 2004 2004 451 269 720 2003 1999 2004 1,620 714 115 2,449 Model Kia 2000 1998 2001 2000 2003 5,646 2,489 1,905 995 123 11,357 Production Begin Production in 2004

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F OR E I G N B R A N D S P RO D U C E D I N R US S I A

Ford Motor Co.

Company Profile Established: 2002 Location: Vsevolozhsk Production capacity: 100,000 Type of investment: 100% greenfield Planned production: Ford Focus II Total production 29,703 Focus Model Production Begin Ford 2002 Production in 2004 29,703

GM-AvtoVAZ
Company Profile Established: 2001 Location: Samara Production capacity: 100,000 Type of investment: JV greenfield Niva Viva Total production Model Production Begin Chevrolet 2002 2004 Production in 2004 55,150 288 55,438

IVECO-UralAz
Company Profile Established: 1994 Location: Chelyabinsk region Production capacity: 3,000 Type of investment: JV Total production 92 IVECO-Ural-6329 Model Production Begin Iveco 1997 Production in 2004 92

IZH-Avto
Company Profile Established: 2003 Location: Izhevsk Production capacity: 60,000 Type of investment: 100% brownfield Total production 592 Spectra Model Kia 2004 592 Production Begin Production in 2004

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T H E R US S I A N A U TOM O T I V E M A R K E T

Scania-Peter
Company Profile Established: 2000 Location: Saint Petersburg Production capacity: 200 Type of investment: 100% greenfield Citybus OmniLink Intercity OmniLine Total production Model Production Begin Scania 2002 2004 Production in 2004 145 1 146

ScanTat Alabuga
Company Profile Established: 2000 Location: Elabuga (Tatarstan) Production capacity: < 500 Type of investment: JV brownfield Total production 25 Bars Model Production Begin Scania 2000 Production in 2004 25

TagAZ
Company Profile Established: 1997 Location: Taganrog Production capacity: 120,000 Type of investment: 100% brownfield Planned production: Hyundai Porter Total production 27,368 Accent Sonata Model Production Begin Hyundai 2001 2004 Production in 2004 20,777 6,591

Volvo-Vostok
Company Profile Established: 2003 Location: Zelenograd Production capacity: < 500 Type of investment: JV FM12 FH Total production Model Production Begin Volvo 2003 n.a. Production in 2004 220 n.a. 220

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F OR E I G N C A R S A L E S

Foreign Car Sales

Sales of Foreign New Cars from Major Automotive Brands
Hyundai* Toyota Ford* Daewoo Mitsubishi Nissan Kia* Renault* Opel Mazda Peugeot Volkswagen Suzuki Honda Skoda Volvo BMW* Citroen Audi Mercedes
0 10,000 20,000 2004 Source: Autoreview, Autoizvestia *Includes Russian production 30,000 2003 40,000 50,000 60,000

2004 Best Sellers

Class A Daewoo Matiz Kia Picanto Suzuki Wagon R+ Class B Hyundai Accent Hyundai Getz Kia Rio Class C Ford Focus Daewoo Nexia Mitsubishi Lancer Class D Nissan Primera Toyota Avensis Hyundai Sonata Class E Toyota Camry BMW 5-Series Audi A6 Class F Mercedes S-Classe Audi A8 BMW 7-Series SUV Toyota RAV4 Nissan X-Trail Mitsubishi Outlander 4x4 Toyota Land Cruiser 100 Toyota Land Cruiser Prado Suzuki Grand Vitara/XL7

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T H E R US S I A N A U TOM O T I V E M A R K E T

Foreign car sales soared to almost 340,000 units in Russia in 2004, up 72.2 percent year on year. Russias relatively low customs duties (25 percent ad valorem) on imported complete built units (CBU) ensure consumer satisfaction, but have not yet prompted other New Car Import by Country 20022004
2004
1.6% 2.6% 8.0% 8.6% 37.3% 12.0% 12.8% 13.4% 29.9% 12.0% 3.8%

original equipment manufacturers (OEM) to begin manufacturing activities in the country. And the commitment of further OEMs in Russia would act as a catalyst for the development of the industry.

2003
4.6%

2002
4.3% 8.6% 26.6% 35.8% 15.9%

17.6% 17.7% 6.6%

20.3%

Japan South Korea Source: Ernst & Young

USA Germany

France Czech Republic

Others

Russia ranks twelfth among the top countries producing vehicles worldwide.

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F OR E I G N C A R S A L E S

Customs Duties on a US$ 10,000 Imported New Car by Country

EU Russia South Africa China Mexico India Brazil Vietnam
10,000 15,000 20,000 25,000 30,000 35,000 40,000

Total wholesale price includes all customs payments, excise and offsetable VAT. For this example a new vehicle with CIF value of $ 10,000; 1,600 cc gasoline engine; the country of origin is Japan; Commodity Classification Code 8703 23 was selected. Simulation as of September 1, 2004. Source: State regulatory documents of the respective countries, Ernst & Young

Presence of Foreign Brand Dealerships in Russia

Moscow St. Petersburg Sverdlovsk District (Ekaterinburg) Republic of Tatarstan (Kazan, Elabuga, Nab. Chelny) Rostov District (Rostov-na-Donu) Samara District (Samara, Togliatti) Permsk District (Perm) Krasnodarsk Region (Krasnodar, Novorossiisk, Sochi) Tumensk District (Tumen, Nishnevartovsk, Surgut) Source: Auto Market of Russia, 2003 242 75 34 24 23 20 18 15 12

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T H E R US S I A N A U TOM O T I V E M A R K E T

Map of European Part of Russia

Kaliningrad4
Kaliningrad

Vsevolozhsk17 St. Petersburg13 Minsk Zelenograd18 Golitsino Kyiv Likino6 Moscow8 Pavlovo12 Nizhny Novgorod11 Ulyanovsk16 Naberezhnye Chelny9 Taganrog14 Togliatti15 Miass7
2

Vsevolozhsk St. Petersburg Minsk Zelenograd Golitsino Likino Moscow Pavlovo Nizhny Novgorod Ulyanovsk Naberezhnye Chelny Taganrog Togliatti Miass Kurgan Elabuga

Kyiv

Izhevsk Neftekamsk

Tbilisi

Astana

Baku

Elabuga1

Izhevsk3 Neftekamsk10

Kurgan5

Tbilisi
1 2 3 4 5 6 7 ScanTat Alabuga (city, intercity buses) GolAZ (city, intercity, suburban, tourist buses) IZH-Avto (cars, LCVs) Avtotor (cars, SUVs, 4X4) KAVZ (suburban buses) LiAZ (city, intercity buses) IVECO-UralAZ (trucks), UralAZ (trucks) 8 AMO ZIL (cars, light trucks, trucks), Avtoframos (cars) RUSIKAR (city, intercity, suburban, tourist buses) 9 10 11 12 13 14 15

Astana
KAMAZ (cars, trucks) NefAZ (all-terrain, city, suburban buses, trucks) GAZ (cars, mini buses, LCVs, trucks) PAZ (city, intercity, suburban buses) Scania-Peter (city, intercity buses) TagAZ (cars, LCVs) AvtoVAZ (cars, SUVs, LCVs) GM-AvtoVAZ (cars, SUVs) 16 UAZ (4X4, LCVs) 17 Ford Motor Co. (cars) 18 Volvo-Vostok (trucks)

Source: company's own data, Ernst & Young

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C ON S U M E R T R E N D S & P ROSPECTS

Consumer Trends & Prospects

Analysts continue to underestimate the Russian car consumption appetite. Slow, but nonetheless tangible, success of foreign dealerships in the regions is a clear barometer of the rising purchasing power of Russians. But everywhere, in the capital as well as in the regions, car consumers are demanding and price sensitive. Often the choice of one make or another is made based on additional options inluded in the base price. Russias car industry is estimated at US$ 22.858 billion in 2004 as compared to approximately US$ 13 billion the previous year. Purchase of Russian cars (excluding foreign brands produced in Russia) accounted for US$ 7.377 billion, up 54 percent compared to 2003.

Car Consumption per Price Segment (in )

2004
1.1% 7.7% 15.1% 35.4% 19.5%

2003
1.6% 5.5% 19.3%

2002
1.6% 5.7% 28.3%

34.2%

40.7% < 10,000 10,00020,000

39.2% 20,00040,000 40,00080,000

45.0% > 80,000

Note: the foregoing diagrams illustrate the number of vehicles sold per segment category according to nominal base prices. A vehicle with a base price in a lower price segment may end up in a higher price segment due to the purchase of options that significantly change the vehicles price. Chevy Niva and Viva sales not included. Source: Ernst &Young, based on sales results provided by Autoreview

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T H E R US S I A N A U TOM O T I V E M A R K E T

Purchase of foreign cars (excluding foreign brands produced in Russia) accounted for US$ 7.769 billion in 2004. Average Price per Car (in US$)
2004 Cars produced in Russia Imported new cars 7,800 31,600 2003 5,000 22,500

The average price for foreign cars purchased on the Russian territory has changed as such:

2002 4,150 17,300

2003/2004 Change in % 56 40

2002/2003 Change in % 22 30

Source: Avtoizvestia * Includes most foreign vehicles produced in Russia

The ability to quickly adapt to the needs of emerging markets is listed among the key challenges of several automotive manufacturers and suppliers. It is a crucial aspect of strengthening global competitiveness in an increasingly tight market while securing manufacturing activities in home countries.

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G OV E R N M E N T R E FOR M S

Government Reforms
Overview of Recent Reforms in Russia
Below is an overview of major reforms implemented within the last three years. Tax Reform Profit tax legislation: beneficial deductibility rules and nominal rate of 24 percent Personal income tax rate of 13 percent for residents3 Standard VAT rate of 18 percent. Leveling down to 13 or 16 percent In discussion Regional tax exemptions are possible (Kursk, Leningrad region, Nizhny Novgorod, Novgorod) Reduction of profit tax rate from 24 percent to 20 percent In discussion Restriction of profit tax benefits provided by local authorities (ensures compliance with local rules and regulations from day one) Reform of payroll taxes
resident must be present in Russia for at least 183 days a calendar year * Since January 2005
3A

Legal Reform Improvement of minority shareholder rights. Extension of competence areas at shareholder meetings, as well as improvement of dividend controls, directorship, and financing methods Corporate law: introduction of a new order (One Window principle) for company registration with the local authorities by the Ministry of Taxes and Levies. Interested parties are permitted to obtain all the information about a company from the registering authority Registration also required for an entrepreneur as a physical body The establishment and annulment of a commercial organization has to be permitted by the Antimonopoly Ministry Law on consumer protection: introduction of liability to the vehicle importer New*

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T H E R US S I A N A U TOM O T I V E M A R K E T

 Currency control law. Restricted currency operations among residents and non-residents Introduction of a housing code designed to stabilize the legal environment surrounding the real estate sector New* Trade Reform Establishment of a free market space covering the territories of Russia, Belarus, Ukraine and Kazakhstan Abolishment of licenses required for leasing. A foreign court can be assigned for cross-border-leasing contracts. Leasing payments can be made in foreign currency
* Since January 2005

Liberalization of the capital market: free convertibility of the ruble by the year 2007 Liberalization of access by foreign insurers to the Russian market Banking and Finance Reform Implementation of a deposit insurance system to secure the stability of the banking sector and the rights of individual depositors New* Tightening of anti-laundering legislation to provide more transparency in payment processes New* Implementation of an institution for tracking the credit records of borrowers New*

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G OV E R N M E N T R E FOR M S

Land Reform Possibility for foreigners to purchase land in Russia (with the exception of certain classes of land, i.e., agricultural land and areas near military bases, etc.) Russian regions now permitted to decide some questions concerning land located within their territories Introduction of several measures on residential and town planning codes, and land transfer New* Customs Duties Reform New Russian Customs Code (Since January 1, 2004). Introduced simplified procedures for importers Customs clearance fee based on the customs value of the imported goods New* Customs tariff groups on automotive parts at 5 percent, 10 percent, 15 percent, and 20 percent Introduction of a flat import tariff on automotive parts at between 3 percent and 5 percent ad valorem In discussion Introduction of pre-shipment inspection In discussion

* Since January 2005

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T H E R US S I A N A U TOM O T I V E M A R K E T

 Introduction of a list describing documents to be included in customs declarations Declaration review period reduced from 10 days to 3 days (delays must be explained by authorities) Specific simplified procedures established for certain categories of importers (Green Channel) Customs authorities empowered to ensure protection of intellectual property Introduction of optional means for customs payments: bank guarantee, lien, or appointment of third person New options for legal action against the customs authorities Reduction of customs check points throughout the country as an effort to counter gray imports and corruption

Import Increased import customs duties on used cars, especially those over seven years of age Export No export customs duties currently apply to automotive industry products

Other Duty Reduction Programs In-kind contributions and fixed assets imported as in-kind contributions to the charter capital of a company with foreign investments are free from customs duties and VAT Deferral of customs payments up to 34 months with respect to fixed assets owned by a foreign leasing company and rented and imported by a Russian legal entity. This deferral is interest free and based on the step-bystep application of customs regimes for temporary import and release into free circulation

Key to Abbreviations CBU: Complete Built Unit CKD: Complete Knocked Down JV: Joint Venture LCV: Light Commercial Vehicle OEM: Original Equipment Manufacturer SKD: Semi-Knocked Down

The obtaining of customs and tax privileges is a rather complex procedure requiring careful planning and preparations.
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E R N ST & Y O U NG I N VOLV E M E N T I N T H E A U TOM O T I V E I N D UST RY

E&Y Involvement in the Automotive Industry

Ernst & Young Solutions for the Issues that Matter
In Russia as in the rest of the world, Ernst & Young has a strong team of automotive specialists. Ernst & Young provides its automotive clients with audit and assurance services; advises them on corporate and personal tax matters; helps them with legal issues and explains the particularities of the local legislation; offers financial solutions and due diligence services; and provides valuable market insight and business development strategies to make a success of operations in the CIS.

Frequently Asked Question

Is it worth entering the market yet?

Key Competence Area

Feasibility study Market (niche) dynamics scenario analysis Risks and key success factors analysis Tax incentive planning Evaluation of target management and planning Strategic analysis of key competitive advantages and weaknesses Tax customs and VAT review planning

What are the current incentives favorable to foreign engagements in Russia?

How can we best take advantage of the Russian tax system? What is the involvement of our competitors?

Market research Sensitivity analysis

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T H E R US S I A N A U TOM O T I V E M A R K E T

Frequently Asked Question

Do we need a Russian partner?

Key Competence Area

Partner fit criteria Partner screening and selection Timeframe IAS and US GAAP Audit Financial and commercial due diligence Background check Legal due diligence Financial modeling Tax incentives planning Business processes modeling Partner search Business valuation Analysis of business environment in specific regions Business strategic valuation Financial modeling Scenario analysis IT due diligence Human Capital Business processes alignment

Is the partner we are targeting the right choice for us? Does he have the right permits and licenses for our business?

What is best: green- or brownfield investment?

In which region should we open an office?

How do we value our investment?

How can we get a "head start" while integrating companies, people, processes, and technologies?

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E R N ST & Y O U NG I N VOLV E M E N T I N T H E A U TOM O T I V E I N D UST RY

Global Automotive Center

Ernst & Young has redefined professional services for the automotive industry with a highly focused and integrated approach. Our dedicated teams of seasoned industry professionals with comprehensive OEM and supplier experience conceive, develop, and help clients implement high-quality, high impact solutions. Please contact one of our area leaders for further details. Global Leadership
Jock Lennox Global IP Leader (UK) Tel.: 44 [0]20 7951 0374 Michael Hanley Global Automotive (US) Tel.: 1 (248) 457-3914 Steven Blackman European Automotive (UK) Tel.: 44 [0]20 7951 2918

Argentina
Benjamin Harriague Tel.: 54 (11) 4318-1520

France
Gilles Puissochet Tel.: 33 (1) 55-61-09-63 Marc Stoessel Tel.: 33 (1) 46-93-66-26

Australia
Sean Balding Tel.: 61 (3) 9288-8535

Germany Belgium
Rudi Braes Tel.: 32 (03) 270-12 35 Peter Fuss Tel.: 49 (6196) 996-27446 Stefan Schulze Tel.: 49 (6196) 996-28002

Brazil
Luiz Frazao Tel.: 55 (11) 3523-5212

Italy
Salvatore Florena Tel.: 39 (06) 3247515-653 Luigi Ragusa Tel.: 39 (02) 80669-712

Canada Operations
Gerard Langlais Global IP (US) Tel.: 1 (401) 457-3772 Stefan Schulze European Automotive (Germany) Tel.: 49 (6196) 996 28002 Dana Tunks Tel.: 1 (416) 941-1762

China
Clive Saunderson Tel.: 86 (10) 8518-8324 Anthony Wu Tel.: 852 2846-9866

Japan
Yoshinobu Shimizu Tel.: 81 (3) 3503-1122

Malaysia
Habib Abdul Tel.: 60 (3) 2087-4102

Denmark
Ole Neerup Tel.: 45 3587-2503

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T H E R US S I A N A U TOM O T I V E M A R K E T

Mexico
Fausto Sandoval Tel.: 52 (555) 283-1471

Spain
Jordi Olle Palou Tel.: 34 933-663-704

United Kingdom
Steven Blackman Tel.: 44 [0] 20 7951-2918 Jock Lennox Tel.: 44 [0] 20 7951-0374

Netherlands
Warmolt Prins Tel.: 31 (40) 260-2210

Sweden
Jan Birgerson Tel.: 46 58-286-3343 Sven-Arne Gardh Tel.: 46 31-63-78-43

US Norway
Rolf Berge Tel.: 47 24-00-23-56 Michael Hanley Tel.: 1 (248) 457-3914 Gerard Langlais Tel.: 1 (401) 457-3772

Switzerland Singapore
Shyan Yan Ho Tel.: 65 6428 7261 Yves Vontobel Tel.: 41 (58) 286-3346

Venezuela Taiwan
Charles Lai Tel.: 886 (2) 2720-4000 Jesus Figueroa Tel.: 58 (241) 823-79-59

South Korea
Tae-Ho Hong Tel.: 82 (2) 3787-6690

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E R N ST & Y O U NG I N VOLV E M E N T I N T H E A U TOM O T I V E I N D UST RY

Contacts in Russia
Emmanuel Quidet Partner, Audit Head of Industrial Products Tel.: 7 (095) 938-6659 E-mail: Emmanuel.Quidet@ru.ey.com Reece Jenkins Partner, Corporate Tax Tel.: 7 (095) 705-9736 E-mail: Reece.Jenkins@ru.ey.com Paul Murphy Partner, Transaction Advisory Services Tel.: 7 (095) 705-9708 E-mail: Paul.Murphy@ru.ey.com Dmitry Tetiouchev Senior Manager, Legal Tel.: 7 (095) 755-9691 E-mail: Dmitry.Tetiouchev@ru.eylaw.com Jean-Francois Tremblay Manager, Automotive Segment Leader Tel.: 7 (095) 755-9692 E-mail: Jean-Francois.Tremblay@ru.ey.com Oleg V. Lukianchikov Analyst, Center for Business Knowledge (CBK), Industrial Products Group Tel.: 7 (095) 705-9700 E-mail: Oleg.Lukianchikov@ru.ey.com

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T H E R US S I A N A U TOM O T I V E M A R K E T

The foregoing does not constitute formal advice. Ernst & Young does not guarantee the accuracy, adequacy, or completeness of any information and shall not be liable in any manner for any error or omission of the results obtained from use of this material.

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Russia
Moscow Sadovnicheskaya Nab., 77, bld. 1 Moscow, 115035 Tel.: 7 (095) 705-9700 7 (095) 755-9700 Fax: 7 (095) 755-9701 St. Petersburg White Nights House Business Center Malaya Morskaya Street, 23A St. Petersburg, 190000 Tel.: 7 (812) 103-7800 Fax: 7 (812) 103-7810 Novosibirsk Inskaya Street 54, 2nd floor Novosibirsk, 630102 Tel.: 7 (3832) 11-9007 Fax: 7 (3832) 11-9008 Ekaterinburg World Trade Center Kuibyshev Street, 44 Ekaterinburg, 620026 Tel.: 7 (343) 379-3510 Fax: 7 (343) 379-3511 Yuzhno-Sakhalinsk Prospect Mira, 149 Office 103 Yuzhno-Sakhalinsk, 693007 Tel.: 7 (4242) 49-9090 Fax: 7 (4242) 49-9411

Azerbaijan
Baku Hyatt International Center Hyatt Tower III Izmir Street, 1033 Baku, AZ1065 Tel.: 994 (12) 490-7020 Fax: 994 (12) 490-7017

Kazakhstan
Almaty Furmanov Street, 240 G Almaty, 050059 Tel.: 7 (3272) 58-5960 Fax: 7 (3272) 58-5961 Astana Hotel Okan InterContinental Astana 7th floor, office 711 Abai Street, 113 Astana, 010000 Tel.: 7 (3172) 58-0400 Fax: 7 (3172) 58-0410 Atyrau Satpaev Street, 19 Office 305 Atyrau, 060011 Tel.: 7 (3122) 99-6099 Fax: 7 (3122) 99-6097

Belarus
Minsk Voronyanskogo Street, 7A Office 709 Minsk, 220039 Tel.: 375 (17) 228-1221 Fax: 375 (17) 228-1222

Georgia
Tbilisi Leselidze Street, 44 Tbilisi, 0105 Tel.: 995 (32) 75-1065 Fax: 995 (32) 75-1066

Ukraine
Kyiv Khreshchatyk Street, 19A Kyiv, 01001 Tel.: 380 (44) 490-3000 Fax: 380 (44) 490-3030

Uzbekistan
Tashkent Inconel Business Center 3rd floor Pushkin Street, 75 Tashkent, 700000 Tel.: 998 (71) 120-6482 Fax: 998 (71) 120-6483

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