MOSCOW – Lada, the car of the Soviet proletariat, survived the transition to capitalism and is now expanding to fend off General Motors and Fiat two decades after the collapse of communism.
Ladas parent OAO Avto VAZ, which is 25 percent-owned by Renault, plans to invest about $5.4 billion to introduce seven models in the next three years. The cars will in some cases replace vehicles that were developed before Mikhail Gorbachev came to power in 1985 and presided over the collapse of the Soviet Union.
Lada, Russias dominant brand with a 24 percent market share, is under pressure to defend that position. GM, Volkswagen and Ford are pushing into the market, which is poised to become Europes largest within three years. GM has an 8.9 percent share and VW 7.5 percent, with both reporting faster sales growth than Lada in the first five months.
The Russian carmakers hopes rest on customers like Sergei Chernikh. The 35-year-old retail manager from Voronezh, about 440 miles south of Moscow, bypassed Fiat and Chevrolet models to buy a Lada 2107 sedan because it was cheap and easy to maintain.
I chose Lada because of the price mostly, Chernikh said. I even can do minor repairs myself if needed, which I wouldnt be able to do if I bought a foreign model because of the large amount of electronic gadgets.
The Lada 2107, one of three so-called classic models, was first introduced in 1982, when Leonid Brezhnev was in power. It starts at $7,300, less than half the price of the Ford Focus and VW Polo.
The other Soviet-era Ladas still for sale are the 2104 and 2105, which are the cheapest Ladas and cost as little as $6,280. The classics are the second-best selling model line in the Russian market .
The challenge for Lada will be to keep prices low, while modernizing technology to compete with foreign brands, said Elena Sakhnova, an analyst at VTB capital in Moscow. Price is Ladas most competitive advantage, especially outside Moscow and St. Petersburg, she said.
To secure its lead, the company has also relied on a network of 385 dealers, which is more extensive than anything foreign brands can currently match. In the Voronezh region, which has a population of 2.4 million people, there are nine Lada dealers compared to one Renault shop.
You can find the same situation in any other smaller city in Russia, Sakhnova said. But the situation is changing and AvtoVAZ will be losing this advantage as Ford, GM, Toyota and others continue to expand.