Wednesday, April 23, 2008

Vehicle Options: USA (1985 vs. 2007) vs. Russia

On Tuesday in Togliatti, Russia, I toured the production facility of the Chevy Niva (pictured above), a joint venture between GM and Russia's AutoVAZ. The vehicles are one of the best-selling SUVs in Russia right now, and there is a 3-month waiting list to get the vehicles. This situation is somewhat unique to the Niva, most other vehicles in Russia are available immediately. The Nivas sell for about $16,000 and there are only two models and one option: with A/C, or without A/C. Also, there are NO radios available in either model, although the Nivas come radio-ready, with wiring and everything except the audio equipment. It seems that in the Russian market, consumers prefer to purchase their own radio/stereo equipment as an after-market option. It might also be the case that some customers prefer radio only, others prefer audio cassette tapes, and some others prefer CD players.

When in Moscow today, I asked the President of GM Russia why GM/AutoVAZ didn't raise the price of Nivas to reduce the 3-month waiting list, and she said that Russian Niva consumers would easily tolerate a 3-month wait, but many would NOT tolerate a price increase. Go figure.

Related: The fascinating chart below is from a USAToday article last week, showing the significant increase in options considered "essential" to car buyers in the USA, 1985 vs. 2007. Notice that in 1985, fewer than 9% of car buyers considered car radios to be an essential option, vs. 96% today - what a difference 22 years makes!

Another difference: almost 100% of the cars in Russia are standard transmission, vs. almost 0% in the USA, and it seems that the acceptance of automatic transmissions here is a long way off - Russian drivers love their manual transmissions!


At 4/23/2008 3:11 PM, Anonymous Anonymous said...

Mark you better get back here ASAP Walmart and other retailers are starting to ration food.

Given that the U.S. has an excess of food production and still exports food including the foods that Walmart and others are rationing isn't this just a stalling tactic for retailers to cash in on rising food prices?

At 4/23/2008 3:59 PM, Anonymous Anonymous said...

You could do a similar comparison to houses. How many in 1985 needed 2400 sq ft, 3 car garage, stainless, granite, whirlpools, walk-in showers, surround sound, etc, etc. Personally, I'm looking to simplify.

At 4/23/2008 6:48 PM, Blogger bobble said...

" she said that Russian Niva consumers would easily tolerate a 3-month wait, but many would NOT tolerate a price increase. "

that attitude must be ingrained in russian consumers from the communist era when things (that were available) were cheap but you had to wait in long lines to get them.

At 4/23/2008 8:12 PM, Anonymous Anonymous said...

There's rationing by price and there's rationing by time. This is the difference between capitalism and socialism in practice. You see the same thing with socialized medicine in the difference between Canadian/Brit socialized medicine and the United States.

I expect there are people who die waiting for their car.

At 4/23/2008 11:46 PM, Anonymous Anonymous said...

> Russian drivers love their manual transmissions!

Well, the main advantage of a manual is in a sports car, off-road vehicle, or something that tows constantly (like a pickup often connected to a trailer or boat), so this American trend can be expected everywhere. The latter two categories are largely not classed as part of the markets you mention, and true sports cars (as opposed to "sporty" cars), while great, are admittedly a niche market, though large.

At 4/23/2008 11:48 PM, Anonymous Anonymous said...

> I expect there are people who die waiting for their car.

Yeah, but not a lot of them die because they were waiting for their car. There is moral time rationing and immoral time rationing.

At 4/24/2008 12:22 AM, Anonymous Anonymous said...

Yup, obloodyhell, That was my point.

At 4/24/2008 4:08 PM, Anonymous Anonymous said...

The radio thing is not as surprising as you think because in 1985 almost everyone wanted to install their own (much nicer than any factory radio could be) radio after purchasing their car. Today, the factory radios are much better and more highly integrated into the car.

At 4/24/2008 7:11 PM, Anonymous Anonymous said...

Great blurb.

You should see the eye-rolling that happens when I daily poke fun at my Russian fellow student with the old Russian reversal.

"In Soviet Russia, Y X's you!"

Interesting tidbit. He tells me the highways are so bad there because of the weather extremes. Hot weather agggregates are too brittle in the cold, cold weather aggragates fly apart in the heat. They mix them 50/50 to try to hold up, and it's a mess.

At 4/24/2008 7:19 PM, Blogger Dr. Tufte said...

The radio here is AM/FM with a tape deck in 1985.

I don't believe it was possible in the U.S. at that time to get a car without an AM/FM radio.

The tape deck was the part that people didn't consider essential, and yes that was because a lot of people preferred the after-market ones. I know I did.

At 4/24/2008 7:25 PM, Blogger Dr. Tufte said...

FWIW: I am getting ready to sell the car I bought when the business school at the University of Alabama put money on the table to hire me as an ABD.

It is a 1989 Ford Probe LX that I bought off the lot, with some packages already pre-installed.

It had: the AM/FM tape deck, air conditioning, rear window defroster, and a remote outside mirror.

At the time, the other professors thought it was pretty slick - without power windows, backup lights, cupholders, power seats, special wheels, and leather seating.

Oh ... and back then it was really cool to have an "entertainment center" in your living room. I couldn't really afford that.

At 4/24/2008 10:13 PM, Anonymous Anonymous said...

I think that option list is highly suspect.

The thing that really makes me wonder about its reliability is the 'backup lights' option, unless they're using this term in a very unusual. Back-up lights -- meaning the lights that come on when you shift into reverse -- are required by law. You might as well say that headlights are extremely popular.

The air-conditioning option should be considered in light of rapid population growth in the Sun Belt. Even barring any changes in expectations, tastes, costs, etc. someone who lived in Chicago in 1985 and retired to Phoenix between then and 2008 might well have changed his mind about the value of air conditioning

It's also worth noting that the presence of some of the options in 1985 were markers of fairly expensive cars, but their *absence* today are markers of very cheap cars. Power windows are widespread now because the manufacturers figured out that it was much easier to design the window mechanism and the door if you never had to accommodate the crank. On many cars, non-power windows aren't even available.

At 4/25/2008 7:14 AM, Blogger Per Kurowski said...

Unless we get the figures of price for delivery now and price for delivery in 3 months we can actually not describe what is happening. If the difference amounts to an annual rate of 3% then clearly the Russians are crazy but if the difference is 100% then perhaps it is the American consumer that should benefit from learning more about patience.

At 4/30/2008 8:36 PM, Anonymous Anonymous said...

"Well, the main advantage of a manual is in a sports car, off-road vehicle, or something that tows constantly (like a pickup often connected to a trailer or boat)"

I think for a number of years auto companies have suggesed automatic transmissions for towing, to avoid the tendency to burn up clutches in standard transmissions.


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