CEO's interview for RBC Head of AURUS Adil Shirinov speaks about the challenges of the auto industry during the pandemic, plans for payback, brand customers and the timing of the release of the Senat sedan and the Commandant SUV.
— From the moment Aurus first appeared, economic conditions have seriously changed: the ruble has depreciated, and restrictions were imposed on the supply of components due to the coronavirus. What's happening with the project now?
— The Aurus project is developing strictly according to the production launch schedule approved by the Ministry of Industry and Trade. Yes, the pandemic has certainly become a challenge for the entire industry, and we had some problematic moments in the spring when the borders were closed, but Aurus successfully overcame this period. At that time, we were already at the stage of agreeing on the technical parameters of the project and choosing partners. We very attentively and carefully chose who exactly we would interact with in terms of equipment and accessories. I can state at the moment that all decisions were made correctly and on time. Aurus is developing clearly in accordance with the accepted schedule, literally day in and day out.
Last year, we planned to start commissioning and the first welding operations on November 23, 2020, and despite the pandemic and all the difficulties, we all started on that very day. The equipment was delivered and installed in the Special Economic Zone, most of it is already there. And, by the way, I have already spoken about this more than once, but still I want to emphasize again that everything will be made of Russian metal from the Magnitogorsk Iron and Steel Works.
— Since you mentioned the equipment, I want to clarify: at the moment, all production is being prepared exclusively for the Senate sedan or already for the Commandant SUV?
— Of course, in parallel, work is underway to adjust the production of the upcoming SUV, because constructively and technologically these are interconnected products. And you have to understand that the sedan and the SUV have so-called common parts, or, more simply, common parts that are used on both models. Therefore, we can say that they go in parallel, accompanying each other. However, according to the canons of the modern car industry, it takes a certain period of time to debug all processes for each model, so there will be an interval between the start of production of serial Senat and Komendant cars. I believe that it will be about 18 months (i.e. the start of production of Komendant is planned for the spring of 2022).
— According to the head of the Ministry of Industry and Trade Denis Manturov, you should show the pre-production version of the SUV in 2021. Moreover, initially its premiere was planned for the summer at the international motor show in Moscow...
— Yes, the Moscow Motor Show, at which the Commandant's presentation was planned, has been canceled. It was then that they wanted to make the debut of the car, because the road tests were already in full swing. Alas, it didn't work out. But next year FSUE NAMI will definitely show the car alive. Now it is difficult to name any specific dates, because the show will also be timed to coincide with some event.
I would like to hold the premiere at a public event, but in that location and at a time when it will be possible due to the epidemiological situation. And I really hope that this will happen in the first half of next year. Moreover, in the first half of the year we will start production of a sedan and start issuing cars to commercial customers.
— Can you now confirm the numbers of pre-ordering cars by commercial customers that were announced at the opening of the Aurus showroom in Moscow? Then something about 500 pre-ordered cars were mentioned.
— This is a commercial secret, and I would not like to talk about it now. I can only note that the figure of 500 and later 700 cars announced at the opening of the showroom showed primarily the interest. These are the so-called preliminary requests of potential customers, but they are stretched in time according to possible production dates. And your question concerns the cars that we will start issuing in May 2021. These are commercial orders for which we have an advance payment according to agreements specifically signed with the company. This batch will include cars for both the domestic market and for export for our partners, who are also Aurus shareholders.
— Since you are talking about the shareholders of Aurus, I cannot help but ask you about them. The structure of LLC AURUS, which was created by FSUE NAMI with the participation of Sollers a couple of years ago, how many owners are there today and with what shareholding?
— Aurus currently has three co-founders. This is, first of all, FSUE NAMI, representing the Ministry of Industry and Trade, which has a 63.5% share in the enterprise. Then it should be noted the Tawazun fund from the UAE, their share is 36%. And these are, in fact, the main beneficiaries owning 99.5% of the company. But Sollers also has a minimum share of 0.5%.
— Are there currently any approximate terms for reaching the payback period of the project?
— If we talk about the payback of the project, then we definitely consider it as a commercial one, where all investments are made in order to return them and earn money in the future. At this stage, we have a payback period of slightly less than 7 years. This is an adequate period by the standards of the modern car industry. But we continue our work in order to improve the parameters of this direction.
— And in the future, when new models or some modifications of current machines appear, development and design work will again fall on FSUE NAMI and the state budget?
— In the future, the development of the model line, of course, should be included in the business processes of Aurus. But this is in the future. And today we are talking about those models that have already been developed by FSUE NAMI and as a product are already ready for production. Aurus is industrializing them. Therefore, it is by these parameters that we consider the payback.
— And what are the production capacities of the assembly plant in Alabuga?
— We do not have a minimum level as such. Obviously, the enterprise is not created to assemble one or a dozen cars. If we talk about the average level of production capacity, then this is about 5,000 cars a year.
At the same time, the main task was to minimize investment. And answering your next possible question, "is it possible to assemble 6,000 cars a year or more," I say that, of course, it is possible. In the meantime, the production capacity has been laid down, which will exactly satisfy the demand for the current model line.
— Will armored versions be assembled on the production line?
— No, as long as the decision is that the assembly of armored versions of vehicles will remain in the competence of NAMI. At the same time, in the future, the assembly of some versions with a low degree of booking at our enterprise could be considered quite calmly. But for now that’s it.
— Where are the car engines and transmissions manufactured? And is it possible to expand the range of power plants for Aurus cars in the future?
— At this stage of the project implementation, we will use only the V8 engine and a nine-speed "KATE" gearbox. The transmission is manufactured in Russia and supplied by the manufacturer itself, so I would like to focus on the engine. One of the projects that we are considering is an analysis of the possibility of using the existing engine plant for the Ford-Sollers joint venture, it was closed back in the summer of 2019 after the American manufacturer left the market.
From a technical point of view, experts are currently working on this issue. From an economic point of view, it would be logical to produce the engine there. Both machining and casting of body parts can be done on site. Moreover, we have an alliance with KamAZ for the production of blanks. Respectively, machining and final assembly of the motors is possible in this plant. But this is one of the options for production in Russia. In any case, exclusively economic expediency will be at the forefront. In the meantime, at the initial stage of assembling machines, we will receive engines that are manufactured at the facilities of NAMI.
— Is there mutual understanding of the timing? When can a joint production of an engine with KamAZ begin in a special economic zone?
— We set ourselves the task of fully implementing this process in the second half of 2022.
— How is the cooperation between Aurus and Sollers now organized?
Cooperation with Sollers is now as follows: the company provides its own production site and professional expertise of the painting line, where all operations will be performed by Sollers specialists. In addition, Ford Sollers provides its specialists to carry out work on the welding complex, which was purchased by Aurus and installed in FS.
In addition, this organization provides expertise in preparation for the launch of production and the selection of some technical solutions, which, of course, are agreed with NAMI. In general, this is one of our main industrial partners in welding and painting, but their job is not related to assembly. Assembly is Aurus' 100% responsibility.
— Since you have focused on assembly, I want to ask about quality control. How and by whom will it be implemented?
— This is the responsibility of Sollers. And they will execute it strictly according to the Aurus specifications and quality requirements that are imposed on these operations.
If we talk about the final product quality control service, this is the structure within Aurus. The division deals with issues of quality management system according to the standards of the modern global automotive industry. Believe me, very soon everyone will have the opportunity to see it with their own eyes when we launch the plant.
— Talking about the future of Aurus as a luxury car brand, is there any strategic plan for long-term development?
— The two main products we are currently focusing on are the Senat sedan and the Komendant SUV. I can add that together with NAMI we are also considering the possibility of using the Arsenal minivan. This model can also be further considered as an addition to our product line. In the future, no one is going to stop, so, of course, there will be a modernization of cars and a possible expansion of the model range. But now it is too early to talk about it.
— The starting price of the Senat sedan of 18,000,000 rubles, which was announced at the opening of the showroom in Moscow, is still relevant today? Is it possible to keep it taking into account the devaluation of the ruble?
— Yes, we continue to adhere to this statement. But I want to point out that there are practically no standard cars in the luxury segment of the car market in which Aurus acts. Customers' wishes are very diverse, and each car is individual, therefore the final price of the car is formed according to the request of a particular customer.