23.03.2007

OJSC “IzhAvto” starts producing third KIA model

Today, on the 23th of March 2007, Izhevsk Automobile Factory (a part of SOK Group) starts producing sport-utility vehicle KIA Sorento.

The decision to produce third KIA model at OJSC “IzhAvto” was reached on the 31st of October 2006 and took the form of the Agreement “On technical cooperation and providing licence” between OJSC “IzhAvto” and KIA Motors Corporation (South Korea) group of companies. Production of KIA Sorrento is carried out under the Regulation 166 of the Russian Federation Government. Production of KIA Spectra (DKD began in March 2004, CKD – in August 2005) and KIA Rio (DKD started in December 2006) in Izhevsk is carried out according to the same arrangements.

Production of KIA Sorento in Izhevsk will be launched in two stages. During the first stage (DKD assembly), covering 2007 and the first 6 months of 2008, OJSC “Izhavto” will manufacture 13,900 Korean SUVs: 8,100 in 2007 and 5,800 in 2008. Full-scale production (CKD) of KIA Sorento, including assembly, paint coating and assembly will start in summer of 2008. These cars will be distributed via SOKIA dealer network.

There will be 13 types of KIA Sorento. Nine of them have 2.5-litre CRDi diesel engines (provided by Hyundai Motor), and the remaining 4 are equipped with 3.3-litre V6 gasoline engines (produced by KIA motors Corp.). Regardless of engine type, the cars comply with Euro-4 environmental protection norms. New IzhAvto SUVs will have a brand new gasoline engine, which they started to install in KIA Sorento in Korea in December 2006. KIA Sorentos with power units of this type haven’t been sold in Russia before. All KIA Sorento versions offer a basic set of 50 options, including a driver side airbag, four-wheel drive, standard cast hubs, beam adjuster, head and rear fog lights, trip computer, steering booster, adjustable steering column, keyless entry, power windows, immobilizer, adjustable headrests, driver’s seat lumbar and height adjustments, air filter, preparation for installation of audio system, etc. Modifications differ in the assortment of extra options, which may be temperature control, electric heated mirrors, passenger side airbag and side & curtain airbags, headlight washers, front seat warmers, electric warmer for the passenger compartment, antilock brake system, power driver seat, power sunroof, heated power mirrors, etc. Izhevsk-poroduced KIA Sorento will have four basic color schemes: «Ebony black», «Dark Gray», «Pure Silver» и «Sand». Depending on options taken, the price for IzhAvto KIA Sorento may vary from 839,000 to 1,149,000 Russian rubles (32,182 – 44,073 USD).

The principal investor for KIA Sorento Izhevsk project is SOK Group. A part of the required finance is provided from OJSC “IzhAvto” own resources. Total cost of the project on DKD-assembly stage is 19.2 mln. RUR (VAT included). The major part of the investments will be allocated to purchasing equipment, construction and installation works, and creating an effective logistics system. Investments in full-scale production of KIA Rio JB and KIA Sorento will amount to 1.35 bn RUR (VAT included), from which 593.4 mln RUR will be allocated to organizing CKD-production of KIA Sorento.

Preparatory works for CKD-production of KIA Sorento have already begun, as for KIA Rio. Construction and assembly work, connected with the installation of the purchased equipment, will start in April 2007. For CKD purposes, new KIA assembly workshops will be installed and the assembly line will be lengthened by 30%. A new line for KIA Sorento will be built, as well as a new plastic paint coating line and a testing line.

As a result of those innovations, in summer of 2008 Izhevsk automobile plant will reach its capacity of 80,000 KIA cars per year. Total production plan for 2008 is 110,000 cars. In 2009 IzhAvto plans to increase production rates to 140,000 cars, including 85,000 KIA cars,

KIA production in Izhevsk is one of the most successful projects of foreign brand cars manufactured in Russia. KIA Spectra model entered Top-10 list of the most popular cars after only a year and a half presence in the Russian market. In 2006, 25,139 KIA Spectra were sold in Russia. It is mostly because of KIA Spectra success, that the brand KIA reinforced its position in the market and demonstrated 43% growth of sales in 2006. At present, Izhevsk-produced KIA Rio cars are coming to the market with positive dynamics, which is a credit to their modern design and correct pricing.

Group SOK Vice-president Andrei Frolov stated: OJSC “IzhAvto” already produces two KIA models: KIA Spectra and KIA Rio. Today we started producing the third model, KIA Sorento, according to our business plan. KIA production in Izhevsk is one of the most successful projects of foreign brand car manufacturing in Russia. And so, we intend to keep cooperation with KIA Motors Corp in the future. We are negotiating with our Korean partners for the fourth KIA model assembly in Izhevsk, however it is too early to say which model it will be.

“Extending cooperation with our strategic partner, KIA Motors Corp, helps to increase production rates of Izhevsk automobile plant, fully use its capacities, and protect its status as one of the most stable industrial enterprises of the Udmurd republic”, said OJSC “IzhAvto” general manager Mikhail Dobyndo. “In 2007 OJSC “IzhAvto” will produce 60,000 KIA cars, which is almost as many as our total production for the previous year”, he added.

«KIA Sorento sport-utility vehicle is going to take a decent place in the Russian market. There is a steady demand for these KIA Motors new generation body-on-frame SUVs suitable for both city and cross-country driving. Among its advantages are: a successful restyling, increased safety level, powerful engine – either diesel or gasoline. In 2006 almost 5,000 KIA Sorento cars were sold in Russia, and the popularity of this model with the Russian motorists will grow after we start producing it at Izhevsk automobile plant. Increase in demand is guaranteed by high assembly quality, flexible pricing, high-level sales service and maintenance in SOKIA dealer network”, - said SOKIA general manager Sergei Shabanov.

Background:
KIA Motors Corp. (www.kiamotors.com, www.kia.com) – is one of the fastest-developing automobile producers in the world. The concern, a part of Hyundai-KIA group, has 14 DKD and CKD plants and more than 32,500 employees in 9 countries. KIA Motors produces more than 1.3 mln cars every year. Company’s dealer network encompasses more than 160 countries. In 2005 sales reached 1.27 mln cars, annual turnover exceeded 16.5 bn USD, and net income – 700.4 mln USD.

SOK Group – is one of the largest private-owned companies in Russia. It incorporates several dozen industrial enterprises in various sectors of domestic economy. The Group’s major business lines are car and auto component production. Annual turnover of SOK’s enterprises in 2005 totalled 2.3 bn USD. The Group has 63,000 employees.

OJSC “Izhavto” is one of the leading auto producers in Russia. Its projected output is 220,000 cars per year. Licensed by KIA Motors Corporation, the plant has assembled (DKD) KIA Spectra cars since August 2005 and KIA Rio JB since December 2006. The enterprise also produces VAZ-21043 and Izh-27175 cars.

SOKIA company is a part of SOK Group. It is an official distributor of KIA Motors Corp. since March 2005, with 98 showrooms meeting all quality requirements of the producer. SOKIA delivers full KIA Motors lineup to the Russian Market.