General Motors, the Zaporizhya Automobile Plant (ZAZ) and UkrAutoZAZ signed two agreements on Nov. 5 that open the door to expanded automobile assembly and distribution in the country.
The deals could also secure UkrAuto holding’s position as a dominant player on the national automobile market.
UkrAuto is involved in automobile production, automobile and parts sales and service. The holding controls half the shares in ZAZ, which is the largest automobile manufacturer in Ukraine. The company also owns the UkrAutoZAZ distribution and sales network.
ZAZ chairman Oleh Papashev said that GM Daewoo Auto and Technology (GM DAT), GM Daewoo Central and Eastern Europe and ZAZ struck a deal to allow ZAZ to assemble GM Daewoo’s Lanos model vehicles with parts supplied by GM DAT and other Ukrainian manufacturers.
ZAZ started partial large component assembly of the Daewoo Lanos in 1998. The first cars assembled in Ukraine from small components will appear in January of next year.
Additionally, ZAZ signed an agreement in March with Adam Opel, a European General Motors division, to begin assembling Opel automobiles. ZAZ currently manufactures Ukrainian-designed Tavria and Slavuta models, and several foreign cars from imported car kits.
ZAZ press secretary Yevhen Kosachyov said that complete automobile assembly is the key to ZAZ’s development.
“It will take millions of hryvnas, which none of Ukraine’s car producers can afford today, to design automobiles. The only way for us to succeed is to assemble existing models,” he said.
The process of complete assembly – which includes welding, painting and assembling small components – would enable ZAZ to increase its share of local Lanos assembly by up to 50 percent. Also, the deal will allow ZAZ to begin exporting the Lanos model.
Ultimately, the move to expand assembly is expected to give Ukraine’s automobile industry a boost.
“If Ukrainian car producers, in addition to our company, are involved in the production of automobile parts, it obviously indicates significant progress in the industry,” ZAZ’s Papashev said.
GM DAT Chairman Nick Reilly said that assembly work would add new jobs at ZAZ, and will be good for Ukraine’s component suppliers, which could potentially become Lanos exporters in the future. The deal would also allow General Motors to increase exports.
“By using DAT’s parts in Lanos models, which are produced in Ukraine and exported throughout the CIS, GM will be able to increase its export share. This is one reason why we are interesting to our Western partners,” said UkrAuto Honorary President Tariel Vasadze.
Oleh Omelnitsky, director of Kyiv-based Auto-Consulting, said that a strategic partnership with GM DAT would be beneficial to Ukraine, allowing the country to access new technologies. And, he added, it is crucial to the development of the industry that ZAZ continues its collaboration with GM DAT.
“Ukraine’s plants will not be able to produce more advanced cars without Western technologies,” he said.
A second agreement between the four companies, also signed on Nov. 5, would allow Chevrolet vehicles to be distributed in Ukraine. The cars would be distributed through the UkrAutoZAZ network, starting in November. GM DAT plans to enter the market with seven models of Chevrolet vehicles.
Reilly said that this agreement would be beneficial for all involved, since Chevrolet automobiles are popular with consumers.
“One in every five cars that GM sells is a Chevrolet,” Reilly said. Omelnitsky noted that the emergence of Chevrolet on the market will give buyers another mid-range option.
“Chevrolet will occupy the position between inexpensive Skoda, Renault and Opel vehicles. It will be a good choice for customers who want a more advanced car than Daewoo, but can’t afford Renault or Skoda,” Omelnitsky said.
“Definitely, UkrAuto’s move to distribute Chevrolets in Ukraine will pave the way for ZAZ to assemble these cars in the future,” Omelnitsky added.
Chevrolets built by GM Daewoo are already on sale in markets in Central and Eastern Europe, in North and South America, and in several Asian markets.According to the Auto-Consulting Web site, UkrAuto plans to sell about 8,000 Chevrolets in Ukraine in 2004. The Chevrolet Aveo model will cost between $8,500 and $10,000. The Chevrolet Nubira will cost between $12,000 and $13,500.
