Trade Barriers Frustrate Rising Demand for Cars

DETROIT-- It could be a car seller's dream: an industrialized nation where less than five out of 100 people own cars, and the local industry can supply only one for every five that buyers want. The nation is Russia, and the dream can have some nightmare qualities for U.S. car manufacturers working to create a base of customers there. "The potential is enormous," said David S. Hunt, a spokesman in London for the Ford Motor Company. "One fundamental problem is people having enough money to purchase American cars." Ford, General Motors Corp. and Chrysler Corp. are all represented in Russia, and Russia is represented in Detroit this week. Encouraged perhaps by the lure of the Russia-Sweden World Cup soccer match at the Pontiac Silverdome, Prime Minister Viktor Chernomyrdin agreed to spend Friday with GM executives, touring an assembly plant. A U.S. Embassy analysis of the new and used passenger car market in Russia describes serious barriers to importers, including complicated certification requirements and duties that increased from 92 percent to about 140 percent in 1993. In spite of such obstacles, the share of new and used foreign vehicles sold in Russia rose from 2 percent in 1986 to 10 percent last year and is expected to reach 15 percent this year. As Russia moved toward a market economy in 1992, the top three U.S. manufacturers became significant players. So far, most of their sales are to businesses and government agencies. "They need pickup trucks, they need Jeep products," said spokesman Tony Cervone of Chrysler, which came to the market later than GM and Ford. Like its rivals, Chrysler found a strong demand from businesses. The embassy analysis said there also is a great demand for cars among individual Russians, but the average family might save for six or seven years before they had enough cash to buy. Cervone said that duties, shipping and other variables boost the price of a Jeep Cherokee that might cost $20,000 in the United States to as much as $60,000 in Russia. But Chrysler's three Russian dealers have sold more than 500 vehicles so far this year. Ford has two dozen dealers in Russia and expects them to sell up to 2,500 cars and trucks this year. It mainly sells its European models, including Fiesta, Escort, Orion, Sierra and Scorpio. GM has been represented in Moscow since the 1980s. Popular models have been the Chevrolet Caprice and Cadillac. It seems logical that U.S. car manufacturers sales of cars in Russia should lead to thoughts of building them there. GM is sharing technology with Russia's biggest manufacturer, AvtoVAZ in Togliatti, as it develops a new model to meet world standards. GM spokesman Dave Hudgens said discussions about some sort of joint venture manufacturing are in the very early stages. Russia's political and economic instability create too much uncertainty for major efforts now. Ford is focusing on developing parts-making plants in Eastern European nations neighboring Russia.