Industry, manufacturing

Daimler and KamAZ ink $65m JV for Tatarstan axle production

21 Jan '11
Oleg Kouzbit, Online News Managing Editor

Germany’s Daimler and Tatarstan’s KamAZ have inked a $65m agreement that clears the way for large-scale production of truck axles and components on the Russian auto maker’s home premises. By joining with Daimler, KamAZ not only gets cutting-edge technology but also access to Daimler’s global sales network.

Russia’s leading truck manufacturer, KamAZ, has shaken hands with German auto giant Daimler on a $65m JV to set up truck axle production on KamAZ’s home turf in Tatarstan. Russian stock markets perked up on the news, driving the Tatarstan stock up a hefty 8.86% at the MICEX just hours after the Daimler-KamAZ deal was aired, Finam reported.

The partners

As Russia’s largest heavy truck maker, with a 50% domestic market share, KamAZ ranks eleventh on the international scale. It is also the world’s eighth in diesel engine production. KamAZ Group reportedly comprises 110 production sites, including those abroad (predominantly in CIS countries), and 13 R&D, manufacturing, component design and marketing divisions. It is 11% owned by Daimler.

Germany’s Daimler AG is an international major with an arsenal of global brands: Maybach, Mercedes-Benz, Smart, Freightliner, Sterling, Western Star and Setra. Daimler Trucks, KamAZ’s partner in the deal, produces trucks and commercial vans.

Selling domestically, supplying Germany

According to the Russian company, the current MOI finalizes the two partners’ preliminary joint venture agreements from late 2010 and describes a multi-stage localization strategy for the Naberezhnye Chelny site.

The new JV will start making axles and components for non-driving fore axle systems as well as single- and double-reduction rear axles.

Also under plan, KamAZ will supply axle components to Daimler’s axle-making site in Kassel, Germany, for later assembling. As the JV matures, more investment is envisioned, the source said.

KamAZ quoted Daimler Trucks’ Stefan Buchner as saying the new JV was expecting to also supply the Russian auto maker’s main production line in Tatarstan and Mercedes’ Russian division, Mercedes-Benz Trucks East. He also indicated that Russia would be part of Daimler AG’s global network of auto component manufacturing sites.

From little acorns

The agreement shows the evolution of the Daimler-KamAZ partnership that was revealed last September when serial production of the Mercedes-Benz Actros was launched in Naberezhnye Chelny. According to Russia’s Avtostat, Mercedes-Benz Trucks East says it has plans to also start assembling the Axor and Atego models there.

Trucks on the move

Russia’s commercial vehicle market has been on a roll. Domestic makers report an overall 80% growth in the segment between January and November 2010 with a healthy 49% increase in sales of 14-40-ton trucks (KamAZ’s main ‘bread and butter’).

According to the Association of European Businesses (AEB) that monitors Russia’s auto and other markets, foreign mid-size and heavy trucks sold in this country a solid 2.3 times better between January and September 2010 on a year-on-year basis; 11,761 units were sold. (The fourth quarter results are not yet available.)

2Q 2010 was the most dynamic, analysts note; the heavy truck market segment swelled from a reported 793 to 2,752 y/y.

Commercial vehicles sales, especially trucks, far outperformed passenger car sales which rose 30% last year. Analysts see this as a positive sign of revival in many other economic sectors that need commercial vehicles, primarily construction.

Poised for continued growth

Despite the continued global economic uncertainty, Russia’s poor road infrastructure and manufacturers’ cautious planning, experts forecast that 14+ ton truck sales in Russia will grow another 30% this year.

Although Italy’s Iveco is currently building a plant in the Nizhny Novgorod region and Germany’s MAN has just announced plans to set up shop in St. Petersburg, KamAZ’s proven ability to grow its market share should keep it in a pole position. Since 2008 the firm has expanded from 28% to 50% of the market today. Backed by Daimler, KamAZ should grow even more in the future.
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