Belarus launches new Geely plant and plans for electric cars
Vadzim Smok, BelarusDigest
24 November 2017, 17:34
On 17 November, Belarusian President Alexander Lukashenka participated in the opening of the new BelGee automotive plant, which will produce Chinese Geely cars.
The venture is the largest passenger car enterprise in Belarusian history. Lukashenka also announced a draft decree to create incentives for Belarusians to buy domestically manufactured cars. In August, local developers presented the first Belarusian electric car. Lukashenka personally advocates the development of domestic electric car manufacturing. Although the market for electric vehicles is still young, it is growing highly competitive—even within the borders of the Eurasian Economic Union, of which Belarus is a member. As the Russian government is gearing up to take unprecedented measures to support its own electric car industry, Belarusian developers will have to make serious, well-thought out efforts to become competitive.
Belarus starts to produce Chinese cars
On 17 November, during his visit to the new automobile plant BelGee, Presdient Lukashenka announced that the government is drafting a decree to encourage Belarusians to buy Geely cars built in Belarus. The Belarusian-Chinese BelGee plant, which produces passenger cars under the Chinese Geely brand, was established in 2011. Lukashenka says the state aims for as many Belarusians as possible to buy domestically produced cars. This is going to be the largest passenger auto project with foreign backing in Belarus’s history.
It should be noted, however, that previous projects have not fared well. For instance, over a five year period, the Iranian company Samand produced about a thousand cars which were mainly sold to state organisations. Ford, which manufactured cars in Belarus in the ’90s, did the same amount of sales in a year. The authorities closed both operations, because the enterprises did not meet sales expectations. For 2018 and 2019, the government expects production and sales to reach 25,000 and 35,000 cars respectively. “But we have [still] another goal—to produce more. We will double capacity. We will sell 60,000 cars and then set a goal of 120,000,” the Belarusian president said.
![Belarus launches new Geely plant and plans for electric cars]( "Belarus launches new Geely plant and plans for electric cars")
To be profitable, the plant has to sell at least 35,000 cars a year. However, the Belarusian market cannot absorb even a small fraction of this volume. According to data from the Association of Belarusian Car Owners, over the past 7 years purchases of new cars peaked in 2014. That year, Belarusians purchased around 50,000 vehicles, of which 20,000 were bought in Russia, where prices were attractive at the time. These figures suggest the absolute maximum domestic dealers can expect to sell is around 30,000 new cars. Moreover, the locally assembled Geely will have to compete with other more reputable, global brands. This seems an almost impossible task for the enterprise, as Geely remains outside even the top 25 most popular car models in Belarus, according to 2016 purchasing statistics published by TUT.BY, an online news portal. BelGee strategists say they are aware of the situation. They claim that 90 per cent of new Geely cars will be exported to Russia. But there, they will face virtually the same problem.
Will Russians accept the Belarusian Geely?
Chinese automaker Geely plans to make annual global sales of 2 million cars by 2020. It expects to sell 170,000 cars abroad—80,000 of this number in Russia. However, so far Geely sales remain unimpressive. Worryingly, over first 9 months of 2017, Geely’s most negative sales trend expressed itself on the Russian market. Purchases dropped by 55.4 per cent (1,693 Geelys out of a total 1.13 million sales for the total Russian market) compared to the same period in 2016.
Sergey Udalov, the Deputy Head for Autostat, a consultancy, was quoted by Reuters saying the Belarusian plant will not be able to sell 30,000 cars per year. “I think it is possible to increase sales to 10,000, but I do not think they will be able to sell more,” said Udalov.
In fact, it is Russia that supplies Belarus with cars. Russia manufactures a dozen of global brands, including BMW, Kia, Cadillac, Chevrolet, Renault, Volkswagen, Ford, and Hyundai. For example, 90 per cent of cars sold in Belarus are assembled in Russia. How Belarus will compete with these Russian produced, global brands within Eurasian Economic Union markets remains unclear. Indeed, since the 90s, Belarus has failed to establish a single successful foreign car manufacturing venture. Moreover, a strategy to sell cars to Russia is of questionable value in the context of Belarus’s 30-30-30 goal. This goal intends to even-out Belarus’s export volumes between the EU, Russia and Asia in equal shares, and thereby free it form excessive dependence upon the Russian market. If 90 per cent of cars are intended for the Russian market, it appears the 30-30-30 target does not apply to Geely cars.
Is electrification the answer?
Another issue for Belarusian Geely advocates is the global transition towards electric cars. In the coming decade, electric cars may reach prices comparable to their gasoline-powered counterparts and sales are projected conquer a larger share of the global market. For short-term, the production of petrol-engined Geelys can be justified by huge oil reserves and the absence of legislative incentives to sell electric vehicles in both Russia and Belarus. At first glance, Belarus appears to be taking an approach that risks lagging behind global trends in the very near future. But in fact, the Belarusian government is already trying to anticipate the shift to electric vehicles.
In August 2017, President Lukashenka personally tested and praised the latest Tesla electric car model from the US. The president urged Belarusian developers to use Tesla as an example. That same month, the National Academy of Sciences unveiled the first Belarusian electric car. The prototype is based on the Geely SC7 series, which is assembled in Belarus. Deputy Prime Minister Uladzimir Siamaška noted that with the commissioning of the Belarusian nuclear power plant, Belarus will need to increase its consumption of electric energy. According to Siamaška, in the next three to four years, Belarus will mass produce electric cars.
However, if Belarusians want to develop their own electric car, they must hurry. In October 2017, the Russian government sent a letter to all key ministries and state institutions calling for unprecedented measures to stimulate demand for electric-powered transport. The letter spoke of subsidy programs, preferential car loans and auto leasing for electric vehicles. Owners of shopping and entertainment centres will be awarded tax incentives for installing electric recharge stations. In particular, support will be provided to manufacturers of electric vehicles—both domestic and foreign enterprises—who localise assembly in Russia. The letter also suggests the government will set minimum purchasing quotas for electric vehicles for various state institutions. Given that many Russian auto producers have already begun work on electric cars, Belarusians will need to invent something truly extraordinary to be competitive.
24 November 2017, 17:34
The venture is the largest passenger car enterprise in Belarusian history. Lukashenka also announced a draft decree to create incentives for Belarusians to buy domestically manufactured cars. In August, local developers presented the first Belarusian electric car. Lukashenka personally advocates the development of domestic electric car manufacturing. Although the market for electric vehicles is still young, it is growing highly competitive—even within the borders of the Eurasian Economic Union, of which Belarus is a member. As the Russian government is gearing up to take unprecedented measures to support its own electric car industry, Belarusian developers will have to make serious, well-thought out efforts to become competitive.
Belarus starts to produce Chinese cars
On 17 November, during his visit to the new automobile plant BelGee, Presdient Lukashenka announced that the government is drafting a decree to encourage Belarusians to buy Geely cars built in Belarus. The Belarusian-Chinese BelGee plant, which produces passenger cars under the Chinese Geely brand, was established in 2011. Lukashenka says the state aims for as many Belarusians as possible to buy domestically produced cars. This is going to be the largest passenger auto project with foreign backing in Belarus’s history.
It should be noted, however, that previous projects have not fared well. For instance, over a five year period, the Iranian company Samand produced about a thousand cars which were mainly sold to state organisations. Ford, which manufactured cars in Belarus in the ’90s, did the same amount of sales in a year. The authorities closed both operations, because the enterprises did not meet sales expectations. For 2018 and 2019, the government expects production and sales to reach 25,000 and 35,000 cars respectively. “But we have [still] another goal—to produce more. We will double capacity. We will sell 60,000 cars and then set a goal of 120,000,” the Belarusian president said.
President Alexander Lukashenka launches the Geely plant on 17 November. Photo: Belta
To be profitable, the plant has to sell at least 35,000 cars a year. However, the Belarusian market cannot absorb even a small fraction of this volume. According to data from the Association of Belarusian Car Owners, over the past 7 years purchases of new cars peaked in 2014. That year, Belarusians purchased around 50,000 vehicles, of which 20,000 were bought in Russia, where prices were attractive at the time. These figures suggest the absolute maximum domestic dealers can expect to sell is around 30,000 new cars. Moreover, the locally assembled Geely will have to compete with other more reputable, global brands. This seems an almost impossible task for the enterprise, as Geely remains outside even the top 25 most popular car models in Belarus, according to 2016 purchasing statistics published by TUT.BY, an online news portal. BelGee strategists say they are aware of the situation. They claim that 90 per cent of new Geely cars will be exported to Russia. But there, they will face virtually the same problem.
Will Russians accept the Belarusian Geely?
Chinese automaker Geely plans to make annual global sales of 2 million cars by 2020. It expects to sell 170,000 cars abroad—80,000 of this number in Russia. However, so far Geely sales remain unimpressive. Worryingly, over first 9 months of 2017, Geely’s most negative sales trend expressed itself on the Russian market. Purchases dropped by 55.4 per cent (1,693 Geelys out of a total 1.13 million sales for the total Russian market) compared to the same period in 2016.
Sergey Udalov, the Deputy Head for Autostat, a consultancy, was quoted by Reuters saying the Belarusian plant will not be able to sell 30,000 cars per year. “I think it is possible to increase sales to 10,000, but I do not think they will be able to sell more,” said Udalov.
In fact, it is Russia that supplies Belarus with cars. Russia manufactures a dozen of global brands, including BMW, Kia, Cadillac, Chevrolet, Renault, Volkswagen, Ford, and Hyundai. For example, 90 per cent of cars sold in Belarus are assembled in Russia. How Belarus will compete with these Russian produced, global brands within Eurasian Economic Union markets remains unclear. Indeed, since the 90s, Belarus has failed to establish a single successful foreign car manufacturing venture. Moreover, a strategy to sell cars to Russia is of questionable value in the context of Belarus’s 30-30-30 goal. This goal intends to even-out Belarus’s export volumes between the EU, Russia and Asia in equal shares, and thereby free it form excessive dependence upon the Russian market. If 90 per cent of cars are intended for the Russian market, it appears the 30-30-30 target does not apply to Geely cars.
Is electrification the answer?
Another issue for Belarusian Geely advocates is the global transition towards electric cars. In the coming decade, electric cars may reach prices comparable to their gasoline-powered counterparts and sales are projected conquer a larger share of the global market. For short-term, the production of petrol-engined Geelys can be justified by huge oil reserves and the absence of legislative incentives to sell electric vehicles in both Russia and Belarus. At first glance, Belarus appears to be taking an approach that risks lagging behind global trends in the very near future. But in fact, the Belarusian government is already trying to anticipate the shift to electric vehicles.
In August 2017, President Lukashenka personally tested and praised the latest Tesla electric car model from the US. The president urged Belarusian developers to use Tesla as an example. That same month, the National Academy of Sciences unveiled the first Belarusian electric car. The prototype is based on the Geely SC7 series, which is assembled in Belarus. Deputy Prime Minister Uladzimir Siamaška noted that with the commissioning of the Belarusian nuclear power plant, Belarus will need to increase its consumption of electric energy. According to Siamaška, in the next three to four years, Belarus will mass produce electric cars.
However, if Belarusians want to develop their own electric car, they must hurry. In October 2017, the Russian government sent a letter to all key ministries and state institutions calling for unprecedented measures to stimulate demand for electric-powered transport. The letter spoke of subsidy programs, preferential car loans and auto leasing for electric vehicles. Owners of shopping and entertainment centres will be awarded tax incentives for installing electric recharge stations. In particular, support will be provided to manufacturers of electric vehicles—both domestic and foreign enterprises—who localise assembly in Russia. The letter also suggests the government will set minimum purchasing quotas for electric vehicles for various state institutions. Given that many Russian auto producers have already begun work on electric cars, Belarusians will need to invent something truly extraordinary to be competitive.
