Over the last three years, most OEMs have seen significant growth of spare parts sales in Russia – up to 100% growth for automotive OEMs and up to 250% growth for Heavy Equipment OEMs. Compounding this growth is a continuously strong outlook across the board.
The first thing that struck us was how quickly and robustly the networks have developed – when we first had a close look at the Russian market in 2008, only a couple of OEMs had a presence in the market. Compare this to today, where all EPB participants have at least one warehouse in the region from which they fill both stock and emergency orders, and many OEMs are planning significant structural changes in the upcoming years.
The challenges OEMs face in this marketplace are indicative of a market that is “Emerging, verging on Maturing” - the top five perceived risks are transportation infrastructure, currency, buy/lease real estate, customs, and reverse logistics.
First, let’s start with transportation infrastructure – OEMs indicated that finding the right mix of carriers is key since there is no “one-stop shop” available. OEMs experience delivery issues in metro areas due to traffic and zone restrictions. Eastern Russia is challenged by the distant and remote delivery points. In these cases, having the right carrier can help mitigate these issues substantially.
Second, real estate risk, in terms of the availability of suitable warehouse space, is a key concern for many OEMs. Many OEMs turn to leasing to manage the associated risks and try to negotiate favorable contracts, taking into account the currency risk.
Third, there was broad agreement that finding the right customs broker who has the right relationships and is close to the clearing location is key. The complex clearing process, coupled with a requirement of high document accuracy, can be an impediment, especially on emergency orders.
Bottom Line: OEMs have significantly expanded their presence and volumes in Russia over the last few years and some challenges that EPB participants are tackling, such as an evolving transportation infrastructure and a lack of real estate availability, go hand-in-hand with this growth.