The Russians are coming

The GAZ Group, Russia’s largest manufacturer of commercial motor vehicles, is entering the booming Philippine automotive market with a bullish attitude.

The Russians will initially offer GAZelle buses and trucks to businesses and various industries as well as to the country’s fleet modernization program and later, heavy duty trucks and equipment for “Build, Build, Build” infrastructure projects.

What most attracted the Russian business group to the Philippines is the government’s fleet modernization program, the first stage of which until 2023 will replace more than 200,000 old minibuses, medium and large buses with new reliable, safe and comfortable buses.

More than 150 new bus routes will be launched, a component of the Build, Build, Build program.

Competitors

By forming GAZelle Motors Corporation in partnership with the Eastern Petroleum Group, GAZ will directly compete for sales with Hyundai Motor, which runs Korea’s biggest commercial vehicles (CV) manufacturing division, Foton, China’s largest CV manufacturer, and other major, entrenched CV brands like Isuzu, the Toyota Group’s Hino, Mitsubishi Fuso and MAN.

Tough competition, however, does not faze Fernando L. Martinez, chairman and CEO of GAZelle Motors, which is a wholly owned subsidiary of the Eastern Petroleum Group that he also heads.

The GAZelle Next van, GAZelle Next Premium, and GAZelle Next Executive Class

“The GAZ Group has 85 years of operating and producing European standard vehicles both for public transport and commercial use,” Martinez says. “This impressed us the most as well as their desire to go out and export their products.”

GAZ Group specializes in the development and production of light and medium CVs, buses, heavy duty trucks, power trains and automotive components.

With a choice of gasoline, natural gas or diesel as fuel, its vehicles meet Euro 4 and Euro 5 emission standards.

GAZ Group’s engineering center, Russia’s largest R&D facility, is developing electric vehicles, self-driving vehicles, and vehicles with telematics and advanced driver assist systems.

13 production plants

Although all 13 of its production plants with 40,000 workers are located in the Russian Federation except for one in Turkey and another in Kazakhstan, GAZ Group exports to more than 40 countries worldwide, and is integrating into the global automotive industry via industrial partnerships with Volkswagen and Daimler-Benz.

GAZ Group’s entry in the Philippines is its first business venture in Asia.

At the press conference launching GAZelle Motors last week at the Manila Polo Club, Martinez claimed that if they get to sell 2,000 vehicles annually, they would proceed to invest in a manufacturing facility in the country, which will in turn create more jobs and encourage local parts manufacturing.

GAZ Group sales director for Asia Kristina Dubinina and GAZelle Motors Corp. chairman and CEO Fernando L. Martinez

Martinez first met GAZ Group officials in Makati in April 2017 during the Philippine-Russian business forum sponsored by the Trade and Industry and Foreign Affairs departments together with the Russian Foreign Ministry.

The business forum was part of preparations for the scheduled visit of President Rodrigo Duterte to Moscow the following month.

Decision to enter

Martinez revealed that even before the business forum with the Russians, he had decided to enter the Eastern Petroleum Group of Companies in the automotive industry.

“This decision was a result of deliberate planning as we continue to look for opportunities in providing innovative solutions to the everyday concerns of Filipinos,” he said, referring to the grossly decrepit public transportation system.

The public transport modernization program is what motivated Fernandez to join President Duterte’s trip to Moscow.

“Our initial meeting during their first visit, and the ensuing exchange of information concerning the continuous growth of automobile sales in the country, was one of the factors they considered,” he recalls.

“We also included the opportunity to offer innovative, reliable and reasonably priced solutions in addressing the public transport modernization program, which is so compelling.”

On Sept. 5, 2017, at the Comtrans 17 held in Moscow, Martinez and GAZ Group senior vice president for sales and marketing Christian Kremer signed a distribution agreement whereby GAZelle Motors Corp. will be the exclusive distributor in the Philippines of GAZ Group’s light commercial vehicles, particularly the GAZelle Next minibus and GAZelle Next city bus.

First stage

Kremer said: “The start of sales of multifunctional, reliable and eco-friendly GAZelle minibuses is the first stage of our entry to the Philippine market, which is interesting from both points of view—commercial sales and in terms of participation in a large-scale state program of public transport modernization.”

The GAZelle Next Premium is presented to members of the Philippine media.

Kremer added: “I am sure that with such a strong partner as GAZelle Motors Corporation, we will be able to quickly and confidently develop in this market.”

Martinez said: “Finally, the Philippines will benefit from advanced technology from Russia with respect to reliable and competitively priced vehicles, thanks to the aggressive economic diplomacy of President Duterte with his historic visit to Russia, which paved the way to this partnership.”

After the signing, GAZ Group officials took Martinez on a tour of their integrated production plant in Nizhny, Novgorod.

GAZ at MIAS

At the Manila International Auto Show (MIAS) this April, GAZelle Motors plans to exhibit the GAZelle NEXT minibus and NEXT frame city bus which are powered by either a Cummins ISF2.8sR148 or a Cummins ISF2.8sR129 turbocharged diesel with intercooler engine.

Cummins diesel engines are manufactured in Indiana, USA.

Martinez says that aside from the NEXT minibus and Citiline, they will also display the 4.2-liter, all-terrain, 4×4 Sadko which can carry 24 people, and the Ural NEXT medium and heavy duty trucks.

“Several high capacity buses are also available for city and provincial bus operators,” Martinez points out.

GAZelle Motors has already set up dealer centers in Pasig City, Silang and Kawit, Cavite, Valenzuela City, Metro Cebu, General Santos City, and Metro Davao.

A network of 35 fully trained and accredited after-sales service centers will be provided by local partners Rapide and Payless.

“A nine-day technical training course by Russian technicians was held in Pasig from Feb. 15 to 24, 2018 with 12 senior mechanics,” Martinez said. “Nevertheless, GAZ Group is still open to bringing Filipino technicians to Moscow in the near term for another series of trainings.”

Low maintenance

As for the concern that preventive maintenance service and repair jobs of GAZelle vehicles will be prohibitively expensive since OEM parts will be imported from faraway Russia, Martinez replied: “Spare parts are available already with the initial units.

“GAZ vehicles need low maintenance compared to brands from other countries. For example, oil change is only required at 20,000 kilometers after the first oil change at 5,000 kilometers.

“Russia with its very large land area was forced by their natural circumstances to design very durable and easy to maintain equipment, which lasts for generations.”

Martinez disclosed that GAZelle Motors will work with the consumer banking division of local commercial banks that offer to provide financing.

However, the two government banks—Land Bank and the Development Bank of the Philippines—will handle the requirements for the public transport modernization program.

Since GAZ Group is a private corporation, the government of Russia is not a shareholder.