Russia’s Derways to Hike Capacity

VIENNA – Avtomobilnaya Kompaniya Derways, the Russian assembler of Chinese cars based in Cherkessk, plans to increase its capacity.

Currently, the Derways plant can assemble up to 250 cars a day, or 5,700 a month, from complete-knocked-down kits. That volume assumes 5-day-per-week operation on two shifts a day in the body and assembly shops and three shifts daily on the paint line.

Solano Derways’ best seller.

“We are planning to increase capacity to 125,000 cars a year, or 10,500 a month, also on the same shift basis,” Derways Vice President for Development Alexander Romanov tells WardsAuto.

Construction work to expand the plant may start later this year.

Romanov hopes to assemble up to 47,000 vehicles in 2011. “Our goal is to produce no less than 4,000 a month,” he says. “Our breakeven point is at about 3,100 units a month.”

Derways employs about 1,650 workers assembling Lifan, Geely and Haima cars, as well as Great Wall bodies.

The company’s portfolio includes the Lifan Smily, Breez and Solano cars, known as Lifan 320, 520 and 620 outside of Russia, as well as the Geely MK and Haima3. It also welds and paints Great Wall Hover H3 SUV bodies for delivery to the IMS plant in Gzhel, near Moscow, for final assembly. Its best-selling model is the Solano.

Plans are to add the Lifan X60 cross/utility vehicle into the mix, as well.

“The Chinese car maker has told us we will be able to start assembling the model one year after its start in China, so at the earliest the Russian assembly would start in March 2012,” Romanov says.

In addition, assembly of the Geely Emgrand is expected to start in December or early 2012.

There are no plans for additional Great Wall models.

Last November, Derways launched output of the Haima3, but the company is not happy with volumes. “Haima3 sales are not in optimum shape,” Romanov says. “We sell about 400 Haima3 units a month, which is not satisfactory.”

Derways is negotiating with the Chinese manufacturer for a lower price for the Haima3. If no deal is reached, Derways is likely to cancel plans to assemble the smaller Haima2.

“We already made a mistake regarding the pricing of the Haima3 – it is too expensive,” Romanov admits. “We may even have to quit making it.”

Earlier this year, Russian media reported assembly of Chinese-made FAW Vita and Besturn cars would start soon at Derways.

“This information is false,” Romanov emphasizes. “Admittedly, we did negotiate with FAW last year on assembly of the two models, but at the last talks in February 2011, the Chinese company told us it was still studying the Russian market and had not yet reached a decision.”

However, Derways is in talks with Taiwanese auto maker Yulon Group concerning assembly of Luxgen vehicles.

“We find the Luxgen7 SUV model particularly interesting, but we would also go for the Luxgen7 MPV,” Romanov says.

In addition to the home plant in Taiwan, production of the Luxgen SUV began in China in July at the Chinese-Taiwanese joint venture Dongfeng Yulon Motor in Hangzhou.

“If we were to assemble Luxgen models, the assembly kits would come from Taiwan, however,” Romanov says.