Américas / March-April 1996
By Larry Luxner
Russian automaker Lada, whose boxy little cars have long been a common sight throughout Marxist Cuba, will soon begin assembling vehicles outside Russia for the first time ever. Within the next few months, factories are to begin churning out Ladas in Uruguay and Colombia -- mainly for export to Mercosur and Andean Pact nations.
So says Rafael Patrick Anssens, sales manager for Motores Internacionales S.A. in Panama, which has exclusive Lada distribution rights for 24 Latin American and Caribbean countries. Anssens said Lada would begin by manufacturing 300 units a month in Cali, Colombia, through a local joint venture. Lada will produce a similar number of vehicles in Uruguay in partnership with Montevideo auto distributor Efecto S.A., possibly at an idle auto-assembly plant in the Nueva Palmira free zone previously used by Volkswagen.
"We want to be very prudent," said Anssens. "We don't want to invest too quickly and have financing problems later. We will begin very slowly, only with some models we know will be accepted."
One such model is the three-door Samara 1300, which like all other Ladas is currently assembled at the Togleatti auto plant about 500 kilometers from Moscow. That factory produces 700,000 vehicles a year; most of those are destined for Eastern Europe, China, Turkey and the Far East, though about 50,000 Lada cars end up in Latin America. At an average $8,000 a car, that comes to annual sales of $400 million.
Of course, that pales in comparison to most of Lada's competitors. Renault's chief executive, Pierre Poubel, recently confirmed that his company will invest $1 billion in a Brazilian auto plant before 1999 for the production of 100,000 passenger cars a year. Meanwhile, Herbert Berger, president of Daihatsu do Brasil, says he's considering Minas Gerais as the site for a factory that would produce 10,000 Daihatsu cars a year. Toyota, Mercedes-Benz and Honda also have ambitious plans for Brazil, while Detroit's Big Three -- General Motors, Ford and Chrysler -- are spending billions of dollars on auto factories in Argentina.
Another big investor in Latin America is Italy's Fiat, which in the 1950s and 1960s helped Lada expand into Eastern European markets, according to Fiat spokesman Paolo Vannini. The two companies still have a joint-venture factory in Poland that produces 250,000 cars a year.
Yet Lada is clearly looking to South America for future growth.
"Our biggest market is Chile, where we are selling about 8,000 to 12,000 units a year," said Anssens. "In Argentina, the cars cost $10,000, while Colombia, the price is only $7,000 because taxes there aren't so high, but the average price is about $8,000."
In addition to its low sticker price, Lada's advantages include fewer computerized parts -- making the vehicles easy to repair -- and a thicker-gauge metal than its competitors. "Latin roads have many potholes, and the Lada's suspension system can handle them, whereas more sophisticated Japanese models can't," said Anssens. He conceded that Ladas aren't known for great fuel mileage, but added that this isn't a factor since gas prices are generally low throughout Latin America.
The cars aren't sold in the United States, mainly because they don't have catalytic converters required by the Environmental Protection Agency. However, Ladas are a well-known fixture in Cuba, where until the collapse of the Soviet Union the cars were one of the most tangible symbols of Soviet-Cuban friendship. Today, apart from a few vintage 1950s American automobiles on the road, Lada dominates the island's streets and highways. Since 1990, Motores Internacionales has assumed responsibility for selling Ladas in Cuba, and even has dealerships in Havana and other large cities. Other Caribbean markets for the Russian-made car include Jamaica, Guyana and the Dominican Republic.
According to Anssens, the Cali factory will supply not only Colombia with Ladas, but also the four other members of the Andean Pact: Venezuela, Peru, Ecuador and Bolivia. Likewise, the Uruguay plant will supply fellow Mercosur nations Argentina, Brazil and Paraguay. He declined to specify dollar investment figures or sales projections.
Asked why Lada -- after years of relative obscurity -- is suddenly taking the Latin plunge, Anssens replied: "Everybody else in this area is doing the same."