Detailed Talk

Alpha Automotive Technologies (AAT) is a leading Russian manufacturer of car body parts. It annually produces 9.5+ million parts used for assembling 300,000+ vehicle sets. Maxim Kondratyev, CEO of AAT, told the Moscow Investment Portal what a new plant costs today and how to pay off the investment with a governmental support.

- What does the company produce, who are the consumers?

- Our company blanks car body parts. The main shareholder is IHI Corporation, a Japanese heavy industry company. ZIL still has 17% of the shares. The main AAT client is Renault - Nissan - AvtoVAZ Alliance. The main consumer of our parts is the Renault Russia plant in Moscow. Moreover, 45-50% of our products go to the AvtoVAZ factory.

Our makes are also exported through the RNA Alliance. It means we supply RNA with parts, and RNA ships products for example to Brazil.

- How long has AAT been operating?

- The company was founded in 2007. However, the real production started in 2008 and began accelerating in 2009.

The original idea, the impulse to create a plant, appeared with the Russian Government Resolution #166 on localizing the car assembly production. Thus, Renault Russia had to localize the part blanking by necessity. The stamping is capital intensive and requires large investments: the cost of one press-molding line can reach USD 20 m. And there should be several lines installed. That’s why Renault was heading for optimization and searching for suppliers who could provide blanking services, supply blanked parts to its factory in Moscow.

Fortunately, this kind of shop - then not yet a plant - was found on the ZIL site. It already got press-molding lines installed which were imported to the Soviet Union back in the late 1980s. They were in a pretty good condition, as they used to be underrunning. These press-molding lines were made by IHI, our current shareholder. The company made bold to take a stab in this industry right in Russia despite the fact that it didn’t have any other blanking facilities in the world. That’s how AAT was set up.

The company’s purpose was to transform the ZIL blanking shop into a plant capable to manufacture products in line with the quality requirements of world’s leading car makers. The company has successfully fulfilled its task: now it is the largest supplier of body parts for RNA factories.

- How many people work for AAT?

- The peak was in 2013 with 500 employees, now we have just over 400. However, we think the launch of the new production should raise this figure up to 450 people.

- Tell us more about the new production.

- First, I will tell you why a new production got needed. Moscow is actively running a re-development project for the ZIL industrial zone. It will turn into a residential neighborhood with park areas - which is probably the right thing to be. Unfortunately, our plant was located in that area and probably used to be the only large production facility still operating in the industrial zone.

We developed a plan together with Moscow authorities how to complete the ZIL re-development project and to keep the AAT production at the same time. A new site was found in West Biryulyovo. It was given to us within a a large-scale investment project. The site had just empty spaces, today a new plant is 60% ready, the first line is already being set up. All this was done without any public funds - financed by our Japanese shareholder only.

- How much do you invest in building a new plant?

- We expect to invest at least RUB 1.2 bn. Construction is a very large investment for our company. Nevertheless, we optimize the costs, increase the order stream, and believe in development of the Russian car making industry - all this makes us believe in a 7-year project payback time.

- You have entered into a special investment contract with the Moscow Government to set up production. What will you get out of that?

- The investment contract gives us benefits through reduced profit and property taxes and discounted rent rate. We also hope to get a Moscow subsidy to connect to the grid and utilities.

Tax benefits will allow us to free up funds and to pay back the construction loan. This is a rather strong support measure: we assume, the benefits should additionally bring the company about RUB 450 m in a ten-year time.

- Did someone help you to get prepared for this contract?

- Moscow has gathered a rather effective team dealing with industrial enterprises. The “counter” for working with them is the Moscow Department of Investment and Industrial Policy. They helped us a lot there - thank you very much for that.