Greenfield or Brownfield on the example of DIP projects

Report
Russian-Turkish Business Forum
Thematic trend: Strategy of innovative development of Russian Federation automotive
industrial cluster
Report theme: Regions’ development by means of Industrial parks creation. Project of
Dimitrovgrad Industrial Park creation
Reporter: Chairman of the Management Board of ОАО «United Automotive Technologies» Mihail
Nikolaevich Dobyndo
20-22 October 2010.
0
1.
Brief information about UAT plants
2.
Brief description and plants location
3.
The necessity of government support for operating plants
4.
Development trend of production line of UAТ plants
5.
Greenfield development in Samara and Ulyanovsk regions
6.
Choice of UAT plants development trends: Greenfield or Brownfield on the example of DIP
project
7.
Project development support from Ulyanovsk Region Government concerning Brownfield
development and Joint Ventures
8.
Brownfield project development and Joint ventures on the examples of DIP
9.
Availability of production areas for projects
10. Proposals to change regulatory framework for automotive components manufacturers support
1
Brief description about UAТ plants
UAT «United Automotive Technologies» was established in 2008. Company managers twelve industrial plants manufacturing automotive components which located in different regions of the country.
UAT «United Automotive Technologies » was established in 2008. Company managers twelve industrial plants manufacturing automotive components which located in different regions of the country.
ОАО «United Automotive Technologies» brings in investments (including foreign) into Russian automotive Industry, raise competitiveness of manufactured products, extends production line, and as a result , increases business worth. At the
present moment the main aim of UAT is formation of the instrument for AVTOVAZ strategy realization of formation automotive component «quasi-branch» around automotive manufacturer and to the highest extent is aiming to mother company activity
– AVTOVAZ.
Strategic Company’s plans include establishing Joint Ventures with foreign partners, oriented to automotive components production, assembled in Russia within production localization programs
Actually UАТ is the first automotive component cluster in Russia
2
3
4
5
Development trends of UAT plants production line
Main functional vehicles modules (TIER I)






Engine/ Assist
systems
Body and exterior
Chassis
Wheels
Suspension
Bumpers and springs
Steering
Supporting elements
Braking system

JV


JV


Passenger seats
Front section
Rear section
Roof
Front doors/rear doors
JV





JV





Development of traditional
competencies


Front/ rear part
Trunk door
Windows/glasses
Lighting
Systems of locks
Windscreen wipers
Additional equipment
Engine
Additional power
systems
Conditioning system
Exhaust system
Fuel injection
Interior



JV
JV

JV



JV
Electrics
Roof
Saloon
Passenger protection
Doors
Pedals
Acoustic
Ventilation
JV
Power supply
Tape recorder
Engine control
Chassis/actuator
Comfort
Safety




JV
JV


JV
JV
Assimilation of new
competencies
Planning modules for assimilation by UАТ plants
Gas exhaust
system
Steering system
Rear suspension
modules
Lock systems ,
access system and
door modules
Front suspension
module
Braking system
Air and fuel
electronic engine
supply systems
Cooling and heat
exchanging
vehicle systems
Planning technologies for assimilation by UAT plants
Small stampings
Average and big
stampings
Automotive
turning parts
Metal Powder
metallurgy
Aluminum casting
Joint Venture
Iron castings
JV
Cimos
JV
Upset forging
technology
JV
Rubber parts
Production
JV
Cimos
6
The necessity of government support for operating enterprises
The plants owned by UAT were built in the beginning of 70-s years of the last century for supplying AVTOVAZ with automotive
components. Most of the plants , due to application of the gradation system, used to be town-forming enterprises, which
besides of population employment, provided towns with central heating, sewerage and drain waters cleaning. UAT’s
plants fulfill their main task by supplying AVTOVAZ conveyer but together with out-of-dating old models «Classics» and
minimum volumes of component development for new vehicles modules, plants are loosing production volumes very
rapidly.
Understanding the situation, Ulyanovsk Region Government and OАО «United Automotive Technologies» signed the
agreement about joint project creation «Dimitrovgrad Industrial Park» in Dimitrovgrad town in the manufacturing site of
ОАО «DAAZ». ОАО «DAAZ» and a number of plants located in this territory, used to provide 100% of AVTOVAZ volumes
on injection and cooling engine systems, heating saloon systems, locks, window regulators, mirrors and so on.
The aim of Industrial Park Creation is transformation of UAT’s plants from today-yesterday status into new supplier model,
providing in such a way a traditional role of reliable supplier for automotive assembling plants, and the most important
point, providing population employment at the expense of creation new jobs instead of the old ones which are going away
together with old vehicle models.
To solve this task is possible only with the partnership with the leading world famous automotive component manufacturers.
Meanwhile, leading automotive manufacturers do not hurry to localize production in Russia, offering direct parts
deliveries from their abroad plants. If you were on their place you would do the same, as applicable regulations of 10-s
years favor their activities:
•
concessionary duties (0 to 14%) for components import, as for assembly, so as for resale at after market;
•
absence of possibility of bringing in government’s investments into energy communications, which are on the plants’
balance;
•
absence of government support concerning investments into plants’ R&D .
A possible way out of this situation can be a federal, regional and local
authorities support for the operating plants.
7
Greenfield Development in Samara and Ulyanovsk regions
SPECIAL ECONOMIC PORT ZONE (SEPZ)
INDUSTRIAL ZONE «ZAVOLZHJE»
Project is being realized at government support at
expenses of budgetary appropriations from
Investment Fund of RF(RF Government directive of
28 August 2009 №1250-р)
SPECIAL ECONOMIC ZONE OF INDUSTRIAL TYPE
«TOGLIATTI»
Territory area 660 Ha
REGULATION OF
CREATION GEZ ISSUE
✍ Federal law «About Special Economic Zones in Russian
Federation» №116-ФЗ of July, 2 , 2005.
✍ RF Government resolution of August, 12, 2010. N 621 «About
creation of Special Economic Zone of Industrial Type in the territory of
Samara region”
ОЭЗ ПТТ «TOGLIATTI»
STAVROPOLSKYII REGION
Togliatti
.
Comparison of Ulyanovsk region privileges with General Economic Zone (GEZ):
N п/п
1
2
Privilege
Income tax
Local taxes
rate (%)
15,5
Property tax
0
Land tax
0
ОЭЗ «Alabuga"
Period of validity
For pay-off period
10 years, from the
moment of registration
10 years, from the
moment of property
right registration
Ulyanovsk region
rate (%)
Period of Validity
13,5
For pay-off period
0
For pay-off period, but
not more than 8 years
For pay-off period, but
not more than 8 years
0
For pay-off period, but
not more than 8 years
3
4
5
6
Transport tax
Customs duties exemption and VAT at import of
foreign equipment (raw material) for privileges
territory
Creation of industrial zones, provided by
necessary engineering communications
Payment for connecting to power network
Provision of subsidies for payment %% at
refinancing rate
0
10 years
0
Exemption
Privilege for SEPZ «Airport Vostochnyi»
As a part of privileges
Doesn’t impose
As a part of privileges
Doesn’t need
No information
As a part of privileges
According to experts it is possible to expect start of production in
2014-2015
Financing of creation engineering, transport, social, innovative and other infrastructure at the
expense of:
Federal budget- 53% (7193 millions of rubles);
Samara region budget – 5,7% (734 millions of rubles);
Samara region Stavropolskii district municipal budget – 0,3% (40 millions of rubles );
Off-budget resources - 41% (5602 millions of rubles ).
.
But there are more than 300 000 m2 not being used
production areas with prepared infrastructure in the territory
of Togliatti
8
Choice of development trend of UАТ plants: Greenfield or Brownfield
on the example of DIP projects
Greenfield
Brownfield (operating plants)
Long-term contracts with OEM
Sales market development at the
expense of partners’ sales markets
 Experience in execution of logistic
and service functions
 Formation of cooperation chains
concerning new products
manufacturing
.
Price reduction
for manufacturing at the
expense of prepared industrial buildings
Price decreasing for logistics
Outsourcing or service functions
Minimization of investments risks
 Prepared infrastructure, provision by
personnel


Building of engineering infrastructure at the expense of federal,
regional and local budgets
The necessity of houses and social infrastructure building for the
personnel or organization of personnel delivery by buses from
the nearest population centers

Diversion of funds for a long period



Personnel can’t wait for some years during building and starting
of production at Greenfield and people have to find jobs in
different regions


Competition with the operating manufacturing sites
Additional costs of Government
Non-realization of automotive industry development program
concerning development of trend «Partnership»
Димитровградский
Индустриальный парк
.
Preservation of jobs
Creation of conditions for social stability in the
region
 Investments to buildings repair and
infrastructures
 Tax revenue
 Positive influence on secondary industries
(building, maintenance service)
Strategy of plants development envisages usage of operating manufacturing sites of Brownfield, the process of Joint
Ventures has already begun.
9
Project development support from Ulyanovsk Region Government concerning development trend of
Brownfield and Joint Ventures
1.
2.
3.
4.
5.
Regulatory framework regarding to concessionary taxation of Industrial parks
is being formed now
in October-November 2010
The system of «common window» is being created now
during 2010 – 2011
Bringing in investments by means of Intergovernmental agreement is being
organized
during 2010 – 2015
1
Tax preferences
4
Increasing of tax
revenue into regional
budget
Social block development is being organized(hotel business, relaxing
infrastructure)
during 2010 – 2012
Ulyanovsk region project development in the field of automotive industry,
logistics and industrial cooperation, regional and urban infrastructure
(investments bringing in)
in 2011
3
Financial model
2
Bringing in
investors
New productions
development
2010 - 2018
EVEN TODAY,
during 2010-2011 the product
localization process is going on !!!
Plants are getting a new development impulse
Joint Ventures are being created
Business structure of the current manufacturers is being changed, new products appear
Additional employees are involved – social status of region is being stabilized
10
Brownfield project development and Joint Ventures on the example of DIP
services
preferences
Ulyanovsk region
Government
R&D
technologies
market
TIER-I
ООО «DAAZ»
R&D
technologies
услуги
partner
ООО «Dimitrovgrad
Industrial Park»
product
product
Joint ventures
order
order
ОЕМ
investments
Other customers
Investments and federal
programs
(investment protection from the side
of Ulyanovsk region Government)
11
Availability of production areas for projects
Areas for projects being realized
46 553 m2
Free areas
6 408 m2
Areas, planned to be freed by
2012
70 337 m2
3-d priority
2-nd
priority
1st priority
12
Proposals to change regulatory framework for automotive components manufacturers support
1.
Continuation of government politics concerning support of automotive manufacturers components regarding to
requirements on components production localization for OEM in the territory of Russia
2.
Requirements on higher volumes localization – min 80% automotive components in the territory of RF
3.
Creation of Joint Ventures at the operating Brownfield
4.
Increase of customs duties at the import of foreign components (at the present moment average 14%, to
increase to 35%)
5.
Investments to Greenfield only in case of absence of operating productions at Brownfield
6.
Government financing of electric-power modernization, logistics and road building of operating Brownfield
7.
Credit concessionary program for Russian party (at 5-6% annualy)
8.
Subsidization of 50% R&D for operating plants
13
Thank you for your attention!
14

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