Doing Business : An American Car Craze : U.S. models are the biggest status symbol for Russia’s new rich. Ford, GM and Chrysler hope to reap big benefits.
In Russia, as in California, you are what you drive.
That is why Moscow businessman Vartan Gevorkian has just plunked down $25,000 for a sparkling new cobalt-colored Jeep Wrangler. While his friends putter around Moscow in Soviet-made Ladas that cost a fourth as much, he is buying an image.
“Even before perestroika , it was my dream to own an American Jeep,” Gevorkian, president of a trading firm, explained. “I had seen them in videocassettes of American movies. I thought that everyone in Moscow would think I was one tough guy if I had a Jeep.
“My dream is coming true,” he marveled as he stood in the busy Chrystal Motors showroom across from the Bolshoi Theater. “I can buy a Jeep right here in Moscow.”
In a country where the average salary hovers near $25 a month, Gevorkian is one of a new class of biznesmeni who can pay 10 or 20 grand for a flashy foreign car. And among the imports, American models are the biggest status symbol for Russia’s new rich.
“The Russian car is just a square box with four wheels. The Russian dream is to live like an American, including owning an American car,” said Ronald Plomp, Ford’s sales manager for the Commonwealth of Independent States, Latvia and Lithuania. “In the long run, this place offers fantastic potential for auto sales.”
As the industry struggles at home, the products of America’s Big Three auto makers--Ford, Chrysler and General Motors--are reaching new markets here. Dealerships selling American cars are springing up by the dozens to cater to the new Russian customer. A handful are authorized company outlets, but far more are independents; exact numbers are hard to come by because the Russian government doesn’t license auto dealers.
And no one is sure precisely how many American cars are bumping along Russia’s roads. More than 10,000 American autos are registered in Moscow alone, according to the Russian Automobile Inspectorate, which says “thousands” more may be found outside the capital.
Hundreds more Fords, Dodges, Cadillacs and other models are arriving every month. As curious Russians stream in and out of showrooms, dealers such as Chrystal Motors sell 50 Chryslers a month.
That may not seem like a lot, but it represents the tip of a very large iceberg. Once it fully joins the world economy, this nation of 148 million potential drivers will be importing cars by the shipload. “The vehicle-to-population ratio here is one of the lowest in the world,” Plomp explained. “When the buying really starts, we want to be here.”
Foreign models of all kinds-- inomarks as they’re known collectively in Russian--are establishing themselves. European makes such as Mercedes-Benz, BMW and Volvo used to be driven only by foreign diplomats and journalists. Now they’re commonplace.
Even luxury cars that would turn heads on Rodeo Drive are being hawked in Moscow. One can buy a Maserati or a Porsche. Rolls-Royce plans to open its first Russian dealership this week.
“There are Russian people who’ve become successful at something and now want something to show for their success,” said James C. Walker, general director of Trinity Motors, a General Motors dealer here. “We sell most of our cars to the new entrepreneurs--the small- and medium-sized businessmen.”
Each of the American Big Three has at least one official dealer in Moscow and St. Petersburg and is opening branches elsewhere. In the long run, Ford hopes to open a showroom in all 21 Russian cities with more than a million inhabitants, Plomp said.
Ford is the only American car maker with a track record in Russia. Henry Ford built an automobile factory in pre-revolutionary Moscow, circa 1908. Members of the imperial family were among those with a Ford in the driveway.
Nowadays the handful of authorized car dealers get their imports straight from the factory. Customers can order exactly what they want, as long as they’re willing to wait three to four months for delivery. Dealers also keep some cars in stock. Although dealers accept both hard currency and Russian rubles as payment, prices are quoted and most buyers pay in dollars.
Far more numerous than official dealers are the unauthorized showrooms of “gray marketeers” who buy new and used cars from dealers abroad, often in the United States, and ship them to Russia on their own. These “auto salons” have popped up by the hundreds in Russian cities, where they can be found in gymnasiums, hotel basements, dirt lots and even on the Moscow fairgrounds built to showcase communism’s achievements.
But whether the car comes from an authorized or a gray-market dealer, it takes a lot of money to buy one. President Boris N. Yeltsin’s government, seeking to fill its coffers and protect Russia’s auto industry, has raised taxes on foreign cars several times. They are now subject to an import tax, excise tax and value-added tax that total 80% of the price.
Between these taxes, plus delivery charges of up to $2,000 per auto, any American car costs about twice as much in Russia as it does in Los Angeles. Bottom-of-the-line American models can go for $25,000 new; more expensive models cost $60,000 to $80,000.
Trinity Motors’ biggest seller, the Chevrolet Caprice, sells for about $65,000, its Cadillac Eldorado for about $80,000. Trinity Motors can also put in special orders for stretch limousines for $150,000 and more.
Used cars are not much cheaper. A 5-year-old Ford station wagon sells for more than $18,000 at Victoria Auto, a gray-market dealer in central Moscow. By comparison, Russian Ladas retail new for $4,400 to $7,200 at Chrystal Motors and even less at Moscow’s car bazaars.
Dealers claim the Russian government is strangling their business with high taxes.
“It’s too high to promote good business. We’d probably sell more than two times more cars with half as big a tax,” said Walker, whose Trinity Motors became the first American dealer in post-Communist Russia in May, 1992.
Russians who can afford imports prefer the bigger American models.
“Most of our businessmen like a solid appearance,” explained Peter Polyakov of Trinity Motors, whose top-selling Chevrolet Caprice has a five-liter engine and room for six passengers.
The Jeep Grand Cherokee is Chrysler’s top seller here, at $60,000 fully loaded. Scorpio, a bargain at $20,000, was the most popular of 1,200 autos Ford sold in Russia last year.
All cars sold by authorized American dealers come specially outfitted for Russia’s bumpy roads and hard winters. They claim that their gray-market competitors import cars that are too delicate.
“We specify all the heavy-duty equipment that’s available,” including special suspension, batteries and tires, Walker said. Engines are refitted to take leaded gasoline because unleaded fuel is unavailable in Russia.
But Russians give their business to both kinds of dealers. Andrei Simyonov bought a Ford Scorpio at a gray-market dealer last year and came to Trinity Motors for his newest car.
“I want to buy a van this time, something for carrying around my kids and going out to my summer house. I’m looking around for the best price,” said Simyonov, director of a Moscow agricultural firm. “But wherever I buy, my new car will definitely be American.”
