BELAZ wants to enlist state support in Russia to fight Komatsu and Caterpillar

The Russian Ministry of Industry and Trade announced the interest of BELAZ in concluding a special investment contract (SPIC) for the production of dump trucks in the Russian Federation using state support mechanisms to strengthen its position in the market of a neighboring country.

BELAZ was interested in the possibility of concluding a special contract for the production of mining dump trucks in Russia, TASS was informed in the Ministry of Industry and Trade of the Russian Federation. At the same time, the department noted that there have not yet been official applications for the conclusion of SPIK from the Belarusian automobile plant to the ministry.

At the end of September this year, Deputy Minister of Industry and Trade Viktor Evtukhov spoke about the potential localization of BELAZ production in Russia. Then the Ministry of Industry and Trade of the Russian Federation took the issue into an “active study”, emphasizing that such a project could well be implemented.

In Russia, there is a practice of concluding special investment contracts (from 2019 – for 20 years) between the state and the investor to stimulate the localization of production. Under this contract, the investor undertakes to create a new production on the territory of the Russian Federation in exchange for soft loans, subsidies and tax preferences.

In the summer of 2019, the Russian “daughter” of Amkodor gained access to industrial subsidies. The Ministry of Industry and Trade, the Government of Karelia and Amkodor-Onogo signed a special contract for the creation of a forestry equipment on the basis of the bankrupt Onega Tractor Plant.

The Belarusian Automobile Plant is one of the largest manufacturers of mining dump trucks in the world, occupies about 30% of the world market. At the same time, Russia is a key buyer for the Zhodino enterprise; in 2019, 28% of all manufactured products were exported to other markets. The main competitors of BELAZ in the Russian Federation are the Japanese company Komatsu and the American Caterpillar.

At the end of September, the assembly production of BELAZ-7558 series dump trucks with a carrying capacity of 90 tons was discussed at the forum of the regions of Belarus and Russia.

“Localization of assembly production is associated with increased competition for the Russian Federation market in this segment. So, manufacturers of similar equipment from Japan and the USA have active assembly plants in the Yaroslavl and Leningrad regions, which allowed them to significantly reduce the cost of its sale for the Russian consumer, “the telegram channel of the Belarusian enterprise says.

Representatives of the plant emphasized that there is no talk of a complete transfer of production: complex and expensive components will continue to be designed and manufactured at the parent company and holding companies.

Russian assembly will allow BELAZ to achieve cost reduction by reducing logistics costs when delivering Russian components. In the BELAZ-7558 series, cooperation with Russian suppliers is quite large, the company emphasized.

In addition, the reduction in cost will bring the use of state support mechanisms for new high-tech industries. It is about the SPIC. Indeed, in addition to the federal center, subsidies are allocated by the regional authorities.

The BELAZ report clarifies that due to the crisis in the coal mining industry, the lack of additional funding, as well as the epidemiological situation, the start of this project is expected no earlier than 2022.

Now BELAZ is in a difficult position. In 2019, there was a drop in prices for raw materials, primarily for coal. Mining companies have reduced the purchase of mining equipment. Accordingly, the production of the Zhodino plant also decreased, and income became less. At BELAZ, an increase in volume indicators is expected in 2021-23, taking into account the possible stabilization of the main markets for products. That is, after three years, a return to the pre-crisis level is possible.