The people's car comes with a fair price!

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— The year has been quite eventful. One of the significant milestones was the launch of full-cycle vehicle production (CKD) in May. This means that welding and painting of vehicles now take place directly at the Moskvich factory. For this, a completely new welding line was built specifically for the Moskvich brand and the Moskvich 3 model. This facilitated the disaggregation of vehicle kits, allowing us to localize the components used in vehicle assembly.

— With the increase in recycling fees, we have observed rising car prices throughout the year. What about your situation? And importantly, what can we expect next year?

— Thanks to the launch of CKD vehicle production mentioned earlier, we were able to stabilize prices for our products. We even repositioned our offerings a bit early in March. Those keeping an eye on the automotive market may have noticed this. And they certainly did, as evidenced by a significant surge in sales of our brand's vehicles. If we look at the results for 2024, with about three weeks left, we have seen a sales volume increase of around 60% compared to 2023. This is substantial. We have disaggregated and transitioned the vehicle to CKD assembly, conducting everything in-house, in one location, which helps reduce production costs, reflected in a more attractive price for consumers. Moreover, we have adopted a so-called fair pricing strategy, where the vehicle's price is fixed and not subject to any additional conditions. Typically, such conditions are persistently offered to consumers when purchasing a vehicle. For instance, trade in your car for a certain benefit, or take a loan for additional perks. But we have a specific price listed on our website. This is the exact amount customers can pay to purchase a vehicle.

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— Some car manufacturers have already stated that they will index prices by a certain amount. Dealers are saying the same. What will your pricing look like next year? Or is it too early to discuss this?

— Yes, it is still too early to talk about that. However, we must admit that entering 2025 will not be easy for us. As everyone likely knows, starting in January 2025, there will be an increase in recycling fees of about 20%.

— And — what’s worse — this will happen every year.

— Unfortunately, that is absolutely correct. To put it in absolute numbers, the recycling fee for the most popular vehicles with engines ranging from 1.5 to 2 liters will be about 800,000 rubles. The key rate plays a significant role here, of course. We are a commercial enterprise and rely on external market financing. The volatility of the ruble also impacts this, as we cannot ignore the ruble exchange rate. However, it is worth noting that, again, thanks to our CKD assembly, we can approach pricing gradually and very cautiously. Certainly, there will be some price indexing in 2025, but regarding our products, it will be within reasonable limits.

— According to forecasts from the analytical agency "Autostat," car sales are expected to decline by about 10% next year. This seems to be a medium scenario for market development, but there is also a negative scenario predicting a 20% drop in sales. What are your predictions?

— Yes, we attended a meeting with colleagues from "Autostat." It included almost all distributors and manufacturers present in the Russian market. So far, no one knows what the Central Bank's rate will be, and consequently, the volatility of the ruble. These factors will influence the market. Ultimately, this will affect consumers' ability to purchase vehicles. It is difficult to predict what the market will look like. The past year has also been unpredictable. We witnessed both significant rises and falls. However, comparing last year's conditions with those expected next year, the current outlook is considerably worse.

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— Nevertheless, it seems to me that "Moskvich," despite everything, is somewhat in a more advantageous position since you have local production. Thus, you have competitive advantages. Let's talk about that. About localization. You mentioned at the beginning that this process is underway. What will happen next? What percentage of parts will be produced in Russia? Will this percentage increase?

— It will increase, as we have signed a special investment contract (SPIC). According to this contract, we are obliged to localize components used in vehicle production. However, it is essential to understand that localization is not solely the manufacturer's responsibility. We must engage partners located in Russia.

— It’s unrealistic to produce everything by ourselves...

— You are absolutely right. We have already achieved a certain level of localization in 2024. We use battery packs manufactured in Russia. We use rubber, wheels, and tires produced in Russian tire factories.

I can also mention that we have a contract with the Bor Glass Factory. Consequently, the glass will also be produced locally. In the future, we plan to incorporate more local components into the vehicle. For instance, fuel tanks will also be manufactured in Russia. Even seemingly minor items like polyurethane foam used for seat filling will be produced in Russia. These "minor details" accumulate to form the vehicle and influence its price.

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— Timur, let’s talk about new models. It's always nice to discuss them. What models do you plan to release next year? And when will consumers be able to see and purchase them?

— One of the most anticipated new models is the Moskvich 8. Sales through the dealer network across the country are expected to start in the second half of February. There are other models as well, and they are currently undergoing testing. However, we still do not have a clear understanding of what the 2025 market will look like. Introducing various models, considering we are manufacturing them rather than importing, is quite resource-intensive and costly. Naturally, if there are favorable conditions for launching new models, we will proceed with those vehicles.

— Let's hope for the best!

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