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Russia's new rich spurn Zil for British luxury

MARK MILNER AND LUKE HARDING - Sep 08 2008 06:00

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The 100 000th Land Rover Freelander 2 recently rolled off the company's production line at Halewood on Merseyside, north west England. Its destination was the city of Surgut in the Siberian oil fields and the Rimini red 2,2 diesel is part of a flood of British-made luxury cars heading for the Russian market.

Land Rover sold more than 12 000 vehicles in Russia last year. In the first quarter of 2008 the total has reached 4 690 vehicles and the company expects Russia will soon overtake Italy to become its third-largest market after Britain and the United States.

Bentley is another luxury marque aiming to appeal to well-heeled Russians, who are no longer content to drive a mere Mercedes or BMW. The days of Zil limousines -- the car of choice among Russia's communist aristocracy -- are a distant memory. Instead, you are more likely to spot a Bentley or a Rolls-Royce parked outside central Moscow's flashier restaurants and in the bucolic garden suburb of Rublyovka, where President Putin has his dacha.

Just down the road from Putin's residence is Barvikha luxury village --a shopping centre for Russia's billionaire elite -- where Bentley has had a showroom since 2003. It is believed to sell about 300 vehicles a year and last week the company opened a new dealership in St Petersburg. The company's chairperson and chief executive, Franz-Josef Paefgen, said that expansion in Russia and other emerging markets such as China had enabled the company to sell 10 000 cars last year for the first time in its history.

"It's all about self-expression and showing off," Alexander Pikulenko, motoring correspondent for the radio station Echo Moskvy said. "People think it's shameful to be seen driving a cheap car. We also have a positive attitude towards English car culture. We like English cars and we like English style."

According to Pikulenko, Russia is likely to overtake Germany as the biggest car market in Europe by 2010. With Russia partially protected from the global economic meltdown by surging oil and gas prices, demand for top-end vehicles can only increase, he believes.

It is not just the luxury market that is booming. Although few companies will be able to claim such a prestigious address as the Rolls-Royce Motors' showroom at No1 Red Square, other carmakers with manufacturing plants in Britain are heading east. This year Nissan said it was expanding production of its British-designed, developed and -built Qashqai to cope with rising European demand, with Russia as one of the model's leading markets. Other British factories are benefiting from the growth in Russia. Toyota's sales of 158 000 cars in Russia last year included almost 21 000 UK-built Avensis cars -- a 59% increase on the previous year.

Car retailers also have their eyes on the Russian market. Over the past 18 months Inchcape has invested significantly in raising its presence in the Russian market, where it sold almost 9 000 vehicles last year. Its enthusiasm is not surprising. After its latest acquisition, chief executive Andre Lacroix observed that the foreign car market grew by 64% last year.

Eric Wallbank, an automotive specialist at Ernst & Young, said the Russian market in new cars was attracting international attention. "It's become a very attractive market for lots of manufacturers in lots of countries. There has been a huge growth in new cars sales but not a commensurate growth in [domestic] production." -- © Guardian News & Media Ltd 2008

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