A feasibility study of heavy agricultural vehicles production

Competence area: Investment

Industry/sector: machine engineering

Year of completion: 2011

Client: a subsidiary of Energia Aerospace Corporation, Russia

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Project background:

The Client, a subsidiary company of Energia Aerospace Corporation, engaged Investorium in estimating the feasibility of organizing the production of heavy wheeled tractors for agricultural and industrial uses. Designed by the Client company and competitively priced, such vehicles were expected to satisfy the demand for agricultural and road construction vehicles in Central Siberia and the Far East of Russia in the face of competition from other local and foreign brands.

Scope of work:

The investment project envisaged setting up the local production to assemble tractors of 5th and 7th traction classes in the Buryat Republic in Siberia. It was expected that the factory setup will be a Brownfield one, that is, the new production would be organized on an already existing production site with all the necessary infra, and component kits would be supplied by the Client’s main plant in St. Petersburg. The initial production localization rate would be 15-20% (partial metal works, painting and assembly), with a step-by-step increase up to 45-50% (full metal works, welding, painting and assembly).

While performing the project, the Investorium team, jointly with the Client's specialists conducted a comprehensive feasibility analysis of the industrial project which included analyzing the market and industry for the given kind of agricultural equipment and assessing the prospective demand for heavy vehicles, considering potential suppliers of vehicles, main components and spare parts, drawing up the production plan, calculating the project's financial parameters, including the need for, and the amount of, investments related to putting the site into operation.

Deliverables:

The results of the project work were handed over to the Client in the form of a business plan for organizing the production of heavy wheeled vehicles for agricultural and industrial uses. The business plan was to be submitted to the Ministry of Economy and the Committee for investment of the Buryat Republic for approval. Once realized, the production project would provide additional revenue to the Republic’s budget and give an impetus to the development of the high-tech industry cluster in the region. Notably, the business plan also focused on the social impact of the project’s realization, and namely, creating multiple new jobs and contributing to the implementation of the Buryat Republic’s development programs aimed at modernizing municipal and road infrastructure.