How Russia’s Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Donate

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

IMAGE: Donat Sorokin/ТАSS

Written by Roman Azanov; Originally appeared at TASS, translated by AlexD exclusively for SouthFront

The overall reduction in defence and national security spending is due to the passing of the peak of modernisation in the army, Russian President Vladimir Putin said at a recent meeting with members of the government. The capacities created at the enterprises of the military-industrial complex (MIC) should produce high-tech products and equipment. By 2025, the “civilian” part of the defence industry should be brought to 30%, and by 2030 to 50%.

And one of the flagships of this process should be RosTech – the state corporation includes more than half of the Russian defence industry. “We have set to ourselves an even more ambitious goal: to reach 50% by 2025 on average for the state corporation, five years earlier than what the President instructed. Already today, the share of civilian products in our enterprises exceeds 30%. And the leaders are companies that have traditionally produced military products. Among them, the NPK “UralVagonZavod” (UVZ), the head of RosTech Sergei Chemezov told TASS.

The largest machine-building corporation of the country is among the leading RosTech companies in the diversification of the defence industry. Now at UVZ, producing the world-famous T-14 “Armata”, T-90, and T-72 tanks of various versions, are not just developing civilian areas, but mastered the production of new products that are looking for their markets.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Deputy General Director of UVZ for civilian products Kiril Tomashchuk. IMAGE: Press Service UralVagonZavod

“In 2018, the share of civilian products produced by UVZ enterprises in the total volume of industrial production amounted to more than 39.8%. The forecast for this year is about 40.9%”, Kiril Tomashchuk, Deputy Director General of the corporation for civilian products told TASS in an interview.

Plants “in the modern market”

The main share of civilian products of the corporation is railway products, about 85%. UralVagonZavod traditionally produced cars, and until recently they have been growing annually. Demand was quite high, and the factories “felt in a good position”. Now, for a number of reasons, it is falling. There was a surplus of railway products.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Traincar assembly shop. IMAGE: Donat Sorokin/ТАSS

“This situation is reminiscent of the experience of 2012 and subsequent changes, when demand was also very high, and then the cars almost stopped selling, says Tomashchuk. In addition to this, the volume of decommissioning of the fleet with expired service life is gradually decreasing. According to the results of the first half of 2019, Russian owners decommissioned 14,595 freight cars of all types, which is less than the results of the same period of the previous year (23,536 units)”.

According to the results of the first half of 2019, two leading Russian freight cars manufacturers, OVK (United Wagon Company) and UVZ, collectively control almost 2/3 of the freight car market. At the same time, their market share at the end of 2018 and the first half of 2019 is gradually decreasing

Kiril Tomashchuk

Deputy General Director of UVZ for civilian products

According to him, in the segment of specialised rolling stock, fitting platforms, grain hoppers, mineral hoppers and covered wagons became leaders in the fulfillment. “There was no demand for petrol tanks in the first half of this year, there is little demand for food tanks, he says. Last year, the share of gondola production in relation to the special fleet was 60.1%, for the six months of this year, it decreased to 52.7%”.

Consequently, the share of the special park is growing and manufacturers specialising in its production are increasing their presence in the market. Thus, according to Tomashchuk, the return of a surplus of gondola cars, a decrease in the efficiency of the railway network, a fall in the rate of attraction (lease) of cars below the investment level is predicted.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Hopper-grain carrier. IMAGE: Press Service UralVagonZavod

“We have, probably, the best competences for the development of new innovative rolling stock therefore here we also regulate the market, the Deputy Head of UVZ notes. We understand that today we expect a reduction in demand for our main product, gondola cars, so we are ready for the production and issuance of special rolling stock”.

There is a task to increase transit from China to Europe approximately four times by 2025, so piggyback and fitting platforms will be in demand first of all. For them, UVZ together with the Federal Freight Company (FFC) have developed a new universal piggyback platform. Its peculiarity is the lowered floor level for transportation of cars of up to 19 meters, the use of removable fitting stops for containers and the ability to transport tracked vehicles. And the first such platform is already in trial operation.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Universal piggyback platform. IMAGE: Press Service UralVagonZavod

“There are 1,133 million cars on the network, and if 60 thousand cars are produced within three years, subject to a reduction in the volume of their write-off, the total fleet will exceed 1.3 million units, which is already critical for operation on the network”, Tomashchuk says. At UVZ, everything is being done to have such products, which will be in demand even in the conditions of a low market, when the demand for rolling stock drops.

Another civilian direction is the development of refrigerated containers. Now the fleet of such cars is either old or they come from China. There is no control over their turnover; they are imported through customs in gray schemes.

OmskTransMash initiated the project “Innovative 40-foot refrigerated containers for transporting fish or perishable products” from December 2017, a company engaged in the modernisation of the T-80BVM tanks and is known worldwide for its heavy flamethrower system TOS-1A “Sun”. Tomashchuk notes that the priority aspect of this project is to reduce the dependence of domestic carriers on purchases of foreign products. The aim is to develop a domestic refrigerated container of size 1AAA (40 feet) with an autonomous refrigeration unit and a full set of automation, with the possibility of connecting the refrigeration unit to external energy sources.

To date, the design documentation for a 40-foot refrigerated container has been developed and approved by the Russian Maritime Register of Shipping. In 2020, “OsmkTransMash” plans to start manufacturing six prototypes in order to certify them. By 2022 the company plans to reach the design capacity of up to 500 containers per year

Kiril Tomashchuk

Deputy General Director of UVZ for civilian products

Fight for markets where there is serious competition

For other products, UVZ has several key areas; it is road construction equipment (Chelyabinsk Tractor Plant). There is interest in such products already abroad.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Tractor production ChTZ. IMAGE: Press Service UralVagonZavod

So, in 2018, at the trade and industrial fair in Damascus, a whole line of technical prototypes was presented that can ensure the recovery of the economy and infrastructure of the cities of Syria. Later, the Syrian delegation visited ChTZ-UralTrak”, where it conducted an equipment test drive.

“As a result of the visit, a cooperation agreement was signed with the Syrian company Renaissance and a corresponding commercial offer was sent for the supply of ChTZ-UralTrak production equipment”, Tomashchuk said. In addition, the Ministry of Industry and Trade of the Russian Federation sent a proposal to the Syrian Embassy in Russia on cooperation with the Syrian side and discussion of promising cooperation projects with the corporation, including financing issues. The Embassy sent this letter to the Syrian Foreign Ministry, which, in turn, transmitted them to the relevant departments of Syria”.

Recently, the leadership of the UVZ met with the Syrian Ambassador to Russia, and as a result, a meeting with the Minister of Transport of the Arab Republic was planned.

In our opinion, the main issue for such projects is the formation of payment mechanisms. Under sanctions, it is often difficult to make payments even if there is money. Therefore, a Protocol of Intent was signed, and now at the level of the Ministry of Industry and Trade, the Syrian Embassy and those entities that are interested in the acquisition, we are working on the supply and sale of road construction equipment. And of course, this is due to the subsequent organisation of the service

Kiril Tomashchuk

Deputy General Director of UVZ for civilian products

The market for construction equipment is undoubtedly one of the most competitive, but here in UVZ we are looking for ways to “occupy this niche”. “We develop and create new types of equipment. For example, with joystick control, with a more modern transmission, in order to at least somehow be in the market, but it isserious competition, says Tomashchuk. We have sales, but certainly there is not a railcar market here where we can influence it and fully understand it, there is a heavier market here. We have a fairly limited line, so now we are looking for partners, including Chinese, with whom we could expand the line and purchase certain technologies”.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Timber-carrier railcar. IMAGE: Press Service UralVagonZavod

There are also several enterprises that produce related equipment (all-terrain vehicles for the Ministry of Emergency Situations, wheel-tracked excavators, machines for the forest industry and more). Such products have a narrow range of customers, but have a stable demand. Its sales form a significant amount of revenue for producing enterprises.

“Revenue from zero”

There are enterprises in the UVZ that were engaged exclusively in military products. According to Tomashchuk, they “simply have no competencies, no knowledge of the market and no opportunities, so we have to raise their revenue almost from zero”.

So, the Yekaterinburg plant No. 9, the main Russian “forge” of artillery barrels for tanks and self-propelled artillery installations, nevertheless found its niche. As part of the diversification, works are carried out on mechanised processing of high precision and manufacture of products according to customer plans. The main nomenclature is axles for high-speed electric trains. “The equipment, competence and knowledge of the company’s employees allow us to do this. And here we see how the market is increasing”, he adds.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Axles for high-speed electric trains. IMAGE: Press Service UralVagonZavod

“Work is also being carried out on the machining of an experimental batch of gear pumps and motors made of high-strength cast iron VCH50 for a foreign customer. We make trial batches, and then we will manufacture them. The average annual components requirement will make 3 thousand pieces, the Deputy Head of UVZ tells. The volumes of the planned orders will allow to fully use the capacity of the plant. Thus, by 2030, taking into account the projected increase in the volume of performance of these works by 4.5 times (compared to 2019), it will achieve revenues of more than 1.2 billion rubles”.

However, the corporation still has factories that are difficult to “make friends” with the “civilian”, these are repair enterprises for military equipment. But even for them UVZ is looking for any orders for non-military products.

“Growth Driver”

At a recent meeting, Vladimir Putin focused on the creation of waste sorting plants in the country. Today, this is one of the most prioritised and promising areas in our country. At the same time, the UVZ corporations face a difficult task of diversifying its production in a fairly short time. Not so long ago, this new direction was engaged by the Central Research Institute “Petrel”, creating a variety of artillery systems and combat modules for both land and marine equipment.

“Petrel” is the enterprise at which the revenue from civil production is equal to zero today. But we plan that it will be one of our “civilian” growth drivers. This is a serious design bureau, which now produces serial military products, and high tech

Kiril Tomashchuk

Deputy General Director of UVZ for civilian products

The project for the production of waste sorting complexes is implemented with the support of the Ministry of Industry and Trade and meets the requirements of the national project “Ecology”, he adds. This project in each region of the Russian Federation will increase the volume of recycling from 6% to 36%. According to Tomashchuk, it is planned to create more than 40 domestic waste sorting complexes by 2029 in various regions of our country.

Solid municipal waste will be processed at the automated waste-sorting complex. The stream will undergo several stages of processing, during which various fractions are selected, including useful components prohibited for disposal (glass, paper, cardboard, metal and plastic), which are sent for recycling. The depth of selection of useful fractions is up to 90%. At the UVZ they do not doubt that the competence and capabilities of the “Petrel” will allow doing it.

Today, according to Tomashchuk, the company selected the production technology of a large foreign company, signed a licensed agreement on the transfer of technology and localisation of equipment production. “R&D is underway to adapt the working documentation, which will be completed by the end of 2019, says the Deputy Head of UVZ. Now ten private concession initiatives have been submitted with the participation of the products of the Central Research Institute “Petrel” for the construction of waste-sorting complexes in the Sverdlovsk and Kaliningrad regions, as well as in the Komi Republic and so on”.

The first complex is planned to start operations in 2021; in the future the production capacity will be more than four complexes per year. It is planned that by the end of 2021 “Petrel” will have from one to three garbage sorting lines.

It is safe to say that at the moment in Russia there are no analogues of this project, because the industry has just begun to develop.

“Smooth and Quiet Running”

In 2018, the UVZ corporation resumed work on the production of new trams. They already transit in Kolomna, Kazan and Yekaterinburg. “There is no need to talk about the activity of purchasing such equipment by the regions, the demand for tram cars in our country is formed due to the solvency of the customer, a particular municipality, but we are constantly negotiating the supply of our new prototypes”, says the Deputy Head of UVZ. As part of the import substitution programme, the corporation has developed a new truck with Russian components and 100 percent localisation in Russia”.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Low floor tram. IMAGE: Press Service UralVagonZavod

The prototype of the new three-section tram model 71-418, presented at the international exhibition INNOPROM-2019, was sent to Yekaterinburg for testing and certification.

“This is a completely low-floor modern tram with a lot of options inside the cabin – there is video surveillance, electronic tickets and charging stations. And another new tram model 71-411, designed for operation on a narrow gauge (1 thousand mm), sent for testing in Evpatoria,” says Tomashchuk, adding that if the prototype in the Crimea will be successfully certified, the UVZ will be able to put on the peninsula about 20 cars within one or two years. According to him, to date, the production capacity of UralTransMash (the developer of the self-propelled howitzers “Msta-S and others) can produce up to 150 units per year with the possibility of growth. The company has developed a new line of low-floor tram cars.

They fully meet the requirements of the programme “Accessible Environment”, providing the possibility of barrier-free movement of the non-mobile category of citizens. Also their main advantages are modularity of a design, high smoothness and silence of a course, convenience of maintenance and the competitive price

Kiril Tomashchuk

Deputy General Director of UVZ for civilian products

However, regional budgets cannot always afford the cost of new transport. And here they expect help from the state. A programme has been developed, according to which there will be a complete update in the pilot cities of urban transport. UVZ is waiting for a certain increase in demand here. “Now we are working with leasing companies, we are going to the regions to supply trams under leasing arrangements. This, probably, simplifies the current payment situation for the regions, the Deputy Head of UVZ says. Plus, we believe that concessions in urban transport can be made separately in electric transport, they can also create solvent demand”.

The Gasification of the Regions

There is another unique project for which a huge market opens up, and it will definitely be in demand in the future. In our country, the problem of gasification of remote regions is quite acute. And this problem can be solved by delivering a container with liquefied natural gas (LNG), transported to places and supplied with stations for liquefaction/deliquefaction of gas.

Now RosTech is also actively developing this area. Its members KAMAZ and The United Engine Corporation have already created mobile power plants running on liquefied gas, and UralKrioMash has made a tank container for LNG delivery to consumers. Today it is the only company in the country that has the competence to create such products.

How Russia's Largest Manufacturer Of Armoured Vehicles Diversifies Its Business

Container tank for gas transportation. IMAGE: Press Service UralVagonZavod

“The pace of development of the gas engine fuel market in Russia, the key consumers of which, in particular LNG, are the main roads, rail, water transport, quarry and agricultural machinery, allow us to consider this area as promising”, points out Tomashchuk. In 2018, at the economic forum, a trilateral agreement was signed between Gazprom-LNG, KAMAZ and UVZ on the development of this gas-engine transport and the creation of gas filling complexes.

To date, work is underway on the production of innovative products container-tank model KC.T75-40/0,8 and tank car model 15-5106-01 for LNG transportation. Completion of the ROC, obtaining the necessary permits and certificates of conformity is planned in the second half of 2020.

Kiril Tomashchuk

Deputy General Director of UVZ for civilian products

In addition, UralKrioMash is working on the development of an LNG storage and gasification module for locomotives with power plants based on gas turbine engines.

“Smart” Cars and Electric Buses

“We see that the development will be on the cars. The main trend will be in the field of digitalisation, the electronic passport of the car.

A “smart” car that will diagnose itself, transmit information about its condition and so on, says Tomashchuk of promising directions. Of course, these are unique competencies within UralKrioMash, the development of low-tonnage LNG and gasification of remote areas without pipelines. On “Petrel”, further development on the subject of garbage, recycling of recyclable materials and disposal of tailings”.

In addition to all of the above, UVZ is working on projects for the production of buses on gas engine fuel (GMT) and electric buses at UralTransMash. “This direction is developing so fast now. Our competence quite allows not only on our own, but also in cooperation, perhaps, with the same Chinese manufacturers, in the production of GMT buses, electric buses and road-building equipment”, concludes Tomashchuk.

Donate

  • Z.P.

    “UVZ, producing the world-famous T-14 “Armata”, T-90, and T-72 tanks”

    They do huge number of upgrades and modernization’s but not so many new tanks. Except now for batch of 100 new T-14 they didn’t do many new tanks in general because there are plenty of older tanks that must be upgraded.

    Occasionally some new T-90 and T-72 are made but not so many really.
    Still T-90 is great export success.
    They did quite few of new T-72B for upgraded version of T-72MB3 (MB4) production. But that production will be closing down soon once all T-72’s selected for the upgrade are finished.

  • LR captain

    this is what happens when you saction a whole country that has a good robust infrastructure they go build their own stuff.

    • occupybacon

      with a growth rate of 1.5% while before the sanctions it was 5.5%

      • LR captain

        before the kievan rus decided to turn backs on Russia Russian imported 1 million tons of grain from them a year later Russia exported 4 million tons

      • Z.P.

        Even 1.5% is good enough comparing to majority of EU countries.
        And those EU countries are not subjected to the economic blockade like Russia is.

        That is an act of war through weaponizing financial ($) and trade instruments – sanctions against Russia.
        Unfortunately for West it has made Russia even more resilient and self sufficient than before.
        Russian growth will be soon 5% again.

        • cechas vodobenikov

          bacon lies—in 2013 nominal GDP growth for Russia was 1.5 %…nominal GDP is largely irrelevant; PPP is far more important as regards the conditions for ordinary people

          • Z.P.

            Even PPP is relative since prices of housing, health care, food, gas and all other basic needs deeply influence standard of living.
            For example in Russia medical care costs you almost nothing while in U.S. costs you fortune to the point that only people with decent salaries can afford to get ill etc.

      • cechas vodobenikov

        found this in a CIA comic book

    • goingbrokes

      Yep, and they have to go and find new markets, and that is how Russia has been forced to make a multi-level alliance with China. This entire Obama inspired sanctions and a long standing anti-Russian stance has been the biggest strategic blunder of the American Empire. To force together a resource giant like Russia, and the most populous and economically dynamic country on the planet together into an alliance only required American diplomatic stupidity to be maintained for over a decade and – the job done! Lol.

  • cechas vodobenikov

    http://www.sott.net/article/425194
    unlike the USA that produces nearly nothing, w a miserable “growth rate “of 2.5%, entirely based upon consumerism, financial services and marijuana, Russia’s 2.5% growth reflects production, observed by the positive balance of trade (contrasted w USA that suffers from a huge negative balance and a shocking debt of 23 trillion USD
    of course this is exacerbated by the silly sanctions and tariffs the US imposes on other nations—unable to compete they rely on begging like prostitutes