Bmw, Mercedes, Rolls Royce Could This Be Russia?

The mid-July opening night in Moscow had it all. Women in low-cut dresses accompanied by duded-up men, some wearing bright pink sports jackets, strode through the glare of a dozen television cameras. Passing two beefy security guards dressed in camouflage paratrooper uniforms, they entered the showroom. There, as a jazz band blared Dixieland, guests sipped cocktails and admired several shiny sedans whose average sticker price is $200,000. Welcome to Russia's first Rolls-Royce showroom.

Rolls-Royce PLC has lots of company. All of a sudden, many of the world's top auto makers are rushing to get a parking place in Russia. It's both a testimony to the flood of hard money that's now washing around the country and a bet that somewhere down the road Russia will become a major market for cars. For now, the key buyers are Russia's newly rich biznezmen, a small group of wheeler-dealers who often operate in dollars. For them, conspicuous consumption is in, and nothing tops a fancy car.

On that scale, a Rolls should score high. Peter G. Terian, the Long Island car dealer who with two partners established the Rolls franchise, visited Moscow last September, did some primitive market research by standing on a street corner, and was awestruck by the number of luxury cars rolling by. "We saw so many Mercedes, but no one was selling Rolls," he says. During his first year, Terian expects to sell two dozen Rollses and Bentleys at prices ranging from $145,000 to more than $300,000. The buyers? "Entrepreneurs, people importing and exporting metals, oil, chemicals, minerals--whatever," he says.

MERCEDES IN MINSK. As Terian's research indicated, Mercedes-Benz is an established player in Russia. Five years ago, it was selling just 70 new cars a year there, mostly to foreign diplomats. But sales spurted to 3,500 last year, mostly to Russian citizens. The company now has at least 15 dealerships from Minsk to Kazan, with three in Moscow alone. Sales are small compared with those in the U.S., but "Russia is still the fastest-growing market in all the world for Mercedes," says Joachim Tr ankle, head of Mercedes-Benz in Moscow.Mercedes hardly has the streets to itself. BMW now has three Moscow dealerships and expects Bimmer sales to jump from 500 in 1992 to about 700 this year. Volvo also has a strong presence, and Ford, Jeep/Eagle, and Nissan are making inroads.

There's more to come. While Rolls was having its grand opening, other carmakers were showing their wares at one of Moscow's first foreign-car shows. Throngs of Muscovites, some toting camcorders, paid the 200-ruble (20 ) ticket price to ogle the latest models from South Korea's Hyundai and Kia, Germany's Volkswagen, and the Czech Republic's Skoda. Some dealers even racked up sales. One Russian toted a suitcase that was crammed with nearly 30,000 German marks and closed a deal on a new VW Golf.

There are limits to sales of new foreign cars. The biggest problem is an exorbitant package of Russian taxes and import levies that totals 87.5% of the sticker price. A Mercedes that sells for $60,000 in Germany goes for $112,500 in Russia. "These customs regulations are ridiculous," says Tr ankle. Some dealers, such as Rolls, are trying to get around the stiff levies by arranging the paperwork so that individuals are selling and buying the cars. The fees and taxes on such deals are much lower than those done by companies.

FEW MECHANICS. Parts are expensive and scarce, and service is limited. In response, foreign carmakers such as Audi and Nissan are opening their own service centers. Also, foreign companies often have difficulty finding capable local partners. "We have many offers from Russians to open more dealerships," says Horst Liesener, general director of Gewika Autoservice, which operates Moscow's three BMW dealerships. "But when you look at them, there's really nothing much to them. They want to make money very easy and very fast."

Selling cars can have a violent side, too. On July 19, four people were slain when a dealership that sells Alfa Romeos, Jeeps, and Range Rovers was machine-gunned. The assailants were allegedly seeking revenge because the dealer had refused to pay protection money.

Despite the problems, the carmakers figure they need to win some sales now. It's an important headstart for the day when Russia's economy turns around and they can really cash in on car mania.

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