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Joint production with the Austrian manufacturer on a new type of engine which is compliant with Euro-4 is to enable GAZ Group to increase sales of products equipped with these engines, both in Russia and abroad.
On February 26 Yaroslavl Motor Plant Autodiesel, part of GAZ Group began production of new YaMZ-534 engine compliant with the Euro-4 standard. This product was developed in cooperation with the Austrian company AVL List GmbH, which made it possible to develop an engine compliant with the cutting-edge technical and operational specifications. The annual design capacity of the first stage of production is 80,000 engines. Investments in the project amounted to RUB 11 bn or about USD 450 mn. Production is to begin in 2Q 2008.
The new engine type is to be installed on heavy machines manufactured by GAZ Group – buses, trucks and some types of road-building machinery. In addition, this engine is to be sold to other third-party consumers, specifically, Belarus-based MAZ. We believe that production of this new modern engine could enable GAZ Group to significantly boost sales of finished products. Firstly, machinery equipped with the modern engine is likely to be more reliable in operation, which should make it possible to attract new clients. Secondly, Euro-4 vehicles can be exported to Europe which is to enable the Group to expand its target markets. Taking into account the price advantage of products manufactured in Russia, demand for GAZ Group’s products is expected to be relatively high.
We are in the process of revising our recommendation on GAZ Group shares. Konstantin Romanov
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GAZ
Capitalization: $238 916 188,80
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