Mikhail Mishustin: ‘All CIS countries are asking how to buy new KAMAZ models’
The premier thinks that the Kama lorry giant will help to create Russia’s own power electronics for cars
The Russian automotive industry is recovering after the coronavirus crisis and will soon face new challenges. The country’s Prime Minister Mikhail Mishustin claimed this during his visit to Naberezhnye Chelny late last week. In the city, the head of the government familiarised with the production of KAMAZ PJSC and participated in a meeting on the lorry giant’s development given modern tendencies in electrical energy. The premier has visited Tatarstan for the second time, while he has been at KAMAZ for the first time. He immediately evaluated the high localisation rate of the cabin plant and the latest Euro 5 engines, discussed state support programmes for the sector. Mishustin’s visit coincided with the signing of two milestone agreements of KAMAZ at the Saint Petersburg International Economic Forum (SPIEF) and preceded the company’s general meeting of shareholders. Read more in Realnoe Vremya’s report.
The flagship of green energy
Before going to Naberezhnye Chelny, Mikhail Mishustin visited Ulyanovsk and discussed aircraft and automotive engineering development in a day. From Begishevo airport, the premier headed towards KAMAZ PJSC and the R&D Centre of the factory. Here he was demonstrated the latest premium gas and diesel KAMAZ-54901 he tested right away. Then he was familiarised with the activity of Engine Plant and Cabin Plant.
In the first plant, Mikhail Mishustin looked the conveyor belt over and installed the cylinder head first-hand, called the volume of 12,000 R6 KAMAZ engines “cool room” for the leadership in the sector. Though he noted that KAMAZ was already one of the leading lorry manufacturers, at least in Russia.
Nowadays the Kama lorry factory is working to expand the production capacity of the R6 engine to 30,000 engines a year with a bigger number of models. While the project of 12-litre 6-cylinder straight engines (aka Tibet at the moment) kicked off in the company in 2014 — it complies with the Euro 5 environmental standard.
Later, the head of the government and Rostec CEO Sergey Chemezov together with Tatarstan President Rustam Minnikhanov tested a KAMAZ e-bus driving it from Engine Plant to Cabin Plant.
On the bus, they discussed sales prospects in Russian regions. So Sergey Kogogin said that the order for Kazan was 50 buses, Moscow would get another 350 buses but he says that the other Russian regions aren’t expressing great interest — obviously hoping for the government’s support. The head of KAMAZ also thanked the government for public support that helped its plants to save employment.
The prime minister compared Cabin Plant with Industry 4.0 in terms of process optimisation and environmental standards complying with green energy requirements. According to Mikhail Mishustin, the production of Euro 5 KAMAZ engines and the start of work on the launch of Euro 6 engines (Editor’s note: the prototype for Euro 6 KAMAZ-910.40 straight six-cylinder turbine diesel was assembled in late 2020) should help the Russian automotive industry to ramp up exports. The localisation rate of Cabin Plant is 72%, but the company promised to take it to 100% in 2022.
In the R&D Centre, Mishustin was illustrated the first Kama-1 e-car, Hercules dustcart and tipper lorry.
Help with growth of foreign orders
A meeting on the further development of KAMAZ PJSC considering modern tendencies in power electronics began after the excursion to the production plant. Together with the republic’s management, Mishustin discussed new mechanisms to support the automotive industry after a big fall last year due to lockdowns around the world, disrupted logistic chains, lower demand for lorries abroad and other problems of the sector. They remembered how the government of Russia had allocated 25 billion rubles to support Russian car manufacturers in May 2020.
One in 11 cars in Russia are sold thanks to public support measures, the head of the government said when opening the meeting and enumerated some of them:
“We implement three programmes of this kind: firstly, preferential lending, secondly, preferential leasing and, thirdly, public subsidisation of gas vehicles.”
As the premier said, more than 50,000 out of 580,000 cars were sold in all stimulating programmes from January to April 2021, which isn’t bad, Mishustin thinks. On the other hand, KAMAZ PJSC received considerable support from a significant investment of 4 billion rubles in Rostec GC. He also reminded the audience about the big resources spent to support leasing, pay interest. Loans are crucial for KAMAZ, Mishustin believes. He promised that this would ultimately lead to a rise in foreign orders. Also, according to him, the Russian authorities helped the lorry mogul once with reducing transportation expenses in the production of gas vehicles, thanks to which the lorry production at KAMAZ increased by 40% for the first time in four months of 2021.
However, he noted that at the moment the Russian automotive industry was quite quickly recovering after the pandemic, the demand for vehicles that had dropped was beginning to grow. In turn, the positive dynamics bring to higher employment, technological modernisation — the effect turns out to be “big and multiplier”.
“I have met with colleagues from CIS countries in Minsk, everybody is asking for one thing: how else they can purchase new KAMAZ models.”
Decisions to develop electric and hydrogen transport
“KAMAZ as well as many other enterprises will have to face serious challenges soon. It is challenges of the future: it is a demand to enhance environmental requirements for cars and reduce, consequently, the negative environmental impact,” the premier claimed. “Some car companies have already announced the transition to production with a reduced carbon footprint. And here more and more requirements are appearing — solutions to such problems are already elaborated, there is a number of solutions, they relate to the development of electric transport, hydrogen transport,” he said and noted that at this moment related ministries were already working to develop a concept for transport with a smaller carbon footprint.
In Russia, with its huge territory and complex climatic conditions, additional efforts to create the market and infrastructure to develop both electric transport and hydrogen transport will be needed, thinks Mikhail Mishustin. The creation of one’s own power electronics for cars and components for charging stations is one of them. Commenting partly on a shortage of “chips”, including for CNC machines, the premier also paid attention to the necessity of developing our own control systems, including numerical control, and process management and engineering systems. He is sure that such competence centres as the R&D Centre of KAMAZ should play a special role here.
Ministry of Industry and Trade is ready to solve the problem of electronics for automotive engineering
The Russian Ministry of Industry and Trade declared the readiness to support automobile factories in case of problems with electronic spare parts. Commenting on difficulties with supplies of microchips, electronics, due to which some enterprises even have to close factories or look for spare parts circumventing suppliers, the director general of KAMAZ PJSC said the “it is a problem for everybody”. So if production and sales growth in 2021 is forecasted at KAMAZ, this won’t happen thanks to new K-4 and K-5 lorries, which contain a lot of electronics, but thanks to an old K-3 lorry model with little electronics: “Everybody understands that there is a deficit of chips, and it will take a bit more than a year to solve his problem. I think the problem of the shortage of chips will disappear in 2022,” Kogogin assumed.
“We are aware of the global crisis in supplies of electronic spare parts, which began in late 2020 and continues gaining pace. Many foreign car manufacturers have already repeatedly suspended production due to a deficit of electronics. In Russia, car manufacturers don’t have problems with supplies of electronic spare parts. We carefully stay tuned for the situation and are ready to provide car manufacturers and their both Russian and foreign suppliers support,” the Russian Ministry of Industry and Trade noted.
Is KAMAZ the first candidate for a new special contract?
Observers don’t consider the visit to KAMAZ accidental. The company submitted an application to sign a new special investment contract (SPIC 2.0), while the Russian Ministry of Industry and Trade had started the first tenders for signing SPIC 2.0 agreements in the chemical industry and agricultural machinery engineering late last year.
The lowest bar of investments in a project was cancelled, the duration of the contract was expanded to 15 years (with investments less than 50 billion) and 20 years (with investments over 50 billion) in SPIC 2.0, unlike in the simply SPIC. Some advanced technology must be used in a project.
Mishustin’s visit took place on the day of the signing of two agreements at once at the SPIEF. An agreement on the creation of an unmanned transport corridor on the Neva M-11 high-speed toll road that is scheduled to be launched in 2024 was signed on 3 June. KAMAZ, National Telematic Systems, X5 Retail Group and First Expedition Company can join the project. The corridor is necessary to test unmanned lorries — they are going to transport freight between logistic terminals that are located not far from the road. It is supposed that about 4 billion rubles will be needed to equip the M-11 with infrastructure for unmanned vehicles. As for unmanned heavy lorries, KAMAZ is the most prepared vehicle for the testing, National Telematic Systems thinks. Russia is already considering the possibility of creating a route for unmanned cars through China, Russia’s Vice Premier Marat Khusnullin claimed.
Before Mishustin arrived in Tatarstan, a memorandum of understanding had been signed between KAMAZ PJSC and Gazprombank Group. The document signed by the company’s Vice Director of Sales and Service Rustam Shamsutdinov and Gazprombank’s Vice Board Chairman Alexey Belous envisages cooperation in the promotion of Russian KAMAZ machinery among Russian businesses via leasing as well as the sides’ active joint involvement in the preparation of measures of public support (subsidisation) for lorries.
In addition, Mishustin had visited sites of KAMAZ PJSC a day before the offline annual meeting of shareholders at which the payout of dividends to the shareholders for 2020 and the expansion of the board of directors to one seat were allegedly to be considered.
A few weeks ago, KAMAZ recommended approving a dividend payout of 0,54 rubles per share. The net profit recommended to be used for dividends will be 24,72% (if the shareholders themselves approve the payout).
Last year, KAMAZ earned 1,55bn rubles of net profit by Russian Accounting Standards. Apart from the 24,74% of the dividends, a part of the company’s net profit equal to 77,3 million rubles was recommended to be transferred for the reserve fund of KAMAZ PJSC. It was offered not to distribute the rest of the net profit, which is a billion rubles, but use to finance the investment programme. A new version of the charter of KAMAZ PJSC, which contains changes to a bigger number of the board of directors (12 instead of 11), is going to be approved at the annual meeting of shareholders. It is unknown at the moment who will become the new member.
Profit instead of loss
In late April, Realnoe Vremya already wrote that KAMAZ showed profit by International Financial Reporting Standards too — 3,1 billion rubles despite the “uneven and nervous last year”, according to Sergey Kogogin. The enterprise managed to outstrip the target, though a year earlier, it had been at a loss, while its revenue rose by 12% totalling 216,9 billion rubles, Moreover, in 2019, KAMAZ showed 1,9bn rubles of net loss, that’s to say, the company’s financial performance increased by 5 billion rubles. 37,028 lorries were sold in domestic and foreign markets, as a result of which the share of KAMAZ PJSC in the Russian market of lorries over 14 tonnes went 4% up and reached 48%.
Its revenue rose thanks to the growth of lorry sales in the country, also because of the launch of the new K-5 model — KAMAZ-54901. Obviously, due to the closure of foreign markets as a result of quarantine-related measures, results in this area were worse. But Sergey Kogogin thinks that 4,359 lorries in 2020 in export sales are not a bad result (5,009 in 2019). Record growth in the revenue was registered in buses, e-buses and special machinery. Revenue in the corresponding segment rose by 61% year on year and amounted to 27,9 billion rubles.
In 2021, the company plans to produce 2,400 new K-5 lorries, 6,700 in 2022, over 11,000 in 2023. However, sales augmented during the first quarter of this year too — by 51% in total compared to the same period last year: from 6,500 to 9,800 lorries. Mainly thanks to the Russian market, of course. Bus sales increased by 25% (to 323 in Q1 2021). So revenue grew too, by 31%, nearly to 50 billion rubles, which is equal to the annual result in 2005. And the loss in the first quarter of 2020 was 1,8 billion rubles, this time KAMAZ had 600 million rubles of surplus.