Interview with AURUS CEO, Adil Shirinov

Adil Shirinov, head of AURUS, on the challenges facing the automotive industry during
the pandemic, plans for profitability, the brand’s clients and the launch date
of the Senat Sedan and the Komendant SUV.

— Economic conditions have changed dramatically since Aurus first made its appearance: the ruble has dropped, and the supply of components has been restricted due to the coronavirus. How is the project going today?

— The Aurus project is proceeding strictly in accordance with the production launch schedule approved by the Ministry of Industry and Trade of the Russian Federation. The pandemic has of course posed challenges for the entire industry, and we had some critical issues in the spring when the borders were closed, but Aurus got through this period successfully. By that point we were already at the stage of approving the technical parameters for the project and choosing partners.
We made our choice of whom exactly we will work with for equipment and tooling extremely carefully and attentively. Right now, I can say that all the decisions we made were made correctly and at the right time. Aurus is developing precisely in line with the agreed schedule, literally to the day. As early as last year, we set the date for the start of commissioning and the first welding operations as November 23, 2020, and despite the pandemic and all the difficulties, we did start it all on that very date. We delivered and installed equipment in the Special Economic Zone, and the greater part of it is now in place. And, by the way, I have already said this more than once and I want to emphasize it once again, everything will be made with Russian metal from the Magnitogorsk Iron and Steel Works.


— Since you mentioned tooling, I wanted to clarify: at the moment is all production is being prepared exclusively for the Senat Sedan, or for the Komendant SUV too?

— Of course, we’re also working in parallel to adjust production for the upcoming SUV, because
the two projects share much in the way of technology and construction. It is important to bear
in mind that the sedan and the SUV have so-called «carry over parts», in other words shared components that are used in both models. So, we can therefore say the projects run in parallel
or accompany each other. However, the rules of the modern automotive industry dictate that it takes a certain amount of time to adjust all processes for each model, so there will be an interval between the start of the Senat and the Komendant production. I think it will take about 18 months, the production of Komendant will begin during the spring 2021.

— According to the Minister of Industry and Trade Denis Manturov, you are scheduled to show
the pre-production version of the SUV in 2021. Furthermore, its premiere was initially planned
for last summer at the Moscow International Motor Show...

— Yes, the Moscow International Motor Show, for which the Komendant presentation was scheduled, was cancelled. That was when we wanted to debut the car, since road tests were already under way. Sadly, that wasn’t to be. But next year FSUE NAMI (Central Scientific Research Automobile and Automotive Engine Institute) will definitely show the car in the flesh. Right now, it is difficult to name any specific dates, because we will also time the premiere to coincide
with some event. I want to debut the car at a public event, but in a location and at a time when it’s possible to do it with due regard for the epidemiological situation. And I really hope that this will be possible in the first half of next year. Especially as in the first half of the year we will be launching series production of the sedan and starting to deliver cars to commercial customers.

— The figures for cars pre-ordered by commercial customers that were announced at the opening of the Aurus showroom in Moscow, can they be confirmed now? Back then, there was talk of nearly 500 pre-ordered cars.

— This is a trade secret, and I would prefer not to discuss it right now. I can say that when the figure of 500 cars was announced at the showroom opening, and later 700 — this was primarily about expressions of interest. These are the so-called preliminary requests from potential customers,
but they are time-expanded according to possible production dates. And your question concerns
the cars that we will start to deliver in May 2021. These are commercial orders for which we have received advance payment under agreements already signed with the company. This batch will include cars both for the domestic market and for export to our partners, including Aurus shareholders.

— Since you are talking about Aurus shareholders, I have to ask about who they are. With regard to the structure of AURUS LLC as established by FSUE NAMI in partnership with Sollers a couple of years ago, how many owners does it have today and what stake do they hold?

— At the moment, Aurus has three co-founders. First among them is FSUE NAMI, representing
the Ministry of Industry and Trade, which has 63.5% ownership of the business. Then we should note the Tawazun fund from the UAE, their stake is 36%. So, in fact these are the main beneficiaries who own 99.5% of the company. But Sollers also has a minimum stake of 0.5%.

— Is there any approximate date for reaching the project break-even point at the moment?

— If we’re talking about profitability, then we definitely see the project as a commercial one, where all investments will be returned and there will be money to make in the future. At this stage, we have
a planned break-even period of slightly less than 7 years. This is a reasonable length of time
by the standards of the modern automotive industry. However, we continue our efforts to improve the parameters in this area.

— And in the future when new models or some modifications of current cars appear, will development and design work again fall on FSUE NAMI and the state budget?

— In the future, development of the model line of course has to be part of Aurus business operations. However, that’s all in the future. And today we are talking about those that have already been developed by FSUE NAMI and are now ready for production. Aurus is industrializing them. That’s why it’s these figures that we use to calculate profitability.

— What are the production capacities of the assembly plant in Alabuga?

— We do not have any minimum level as such yet. Obviously, you don’t establish a plant to assemble just one or a dozen cars. If we talk about the average level of production capacity, then this is about 5,000 cars per year.
The main objective, however, was to minimize investment. And to preempt your next question as to whether it’s possible to assemble 6,000 cars a year or more, I will say that, sure, it is quite possible. In the meantime, we’ve factored for a production capacity which will definitely satisfy the demand
for the current model line.

— Will armored editions be assembled on the production line?

— No, so far the decision is that the assembly of armored versions will remain within the competence of NAMI. In the long run, the assembly of some editions with a low degree of armoring at could quite easily be considered at our plant. But for now, that’s the situation.

— Where are engines and transmissions for the car produced? And will it possible to expand the range of engines for Aurus cars in the future?

— At this stage of the project, we will use only the V8-engine and the KATE 9-speed automatic transmission. The transmission is manufactured in Russia and supplied by the manufacturer itself, so I would like to focus on the engine. One of the projects that we are considering is a review
of the possible use of the existing engine plant of the Ford Sollers joint venture — it was closed
in the summer of 2019 when the American manufacturer withdrew from the passenger car market. Experts are currently working on this issue from the technical perspective. In economic terms, it would be logical to produce the engine there. Both the machining and casting of body parts can be done on-site. The more so as we have a partnership with KamAZ for the production of tailored blanks. And then the machining and final assembly of engines are possible at this plant. But this is just one of the options for production in Russia. In any event, economic expediency alone will take top priority. In the meantime, for the initial stage of car production, we will have engines manufactured at the NAMI facilities.

— Do you have any idea regarding dates? When can joint production of engines with KamAZ
in the special economic zone be launched?

— We’ve set ourselves the target of fully implementing this process in the second half of 2022.

— How is the partnership between Aurus and Sollers currently structured?

— The partnership with Sollers is currently structured as follows: the company provides its own production site and professional expertise for the paint shop, where all operations will be performed by Sollers workers. Additionally, Ford Sollers provides its workers to carry out work at the welding station that was purchased by Aurus and installed at FS. This organization also provides expertise
in preparing the production launch and selecting some technical solutions, which, of course, are then agreed with NAMI. In general, they are one of our major industrial partners in welding and painting, but their work does not relate to assembly. Assembly is 100% Aurus’ responsibility.

— Since you are focusing on assembly, I would like to ask you about quality control. How and by whom will it be performed?

— This is the responsibility of Sollers. And they will perform the work strictly under the quality specifications and requirements that are imposed on those operations by Aurus.
If we talk about the final product quality control unit, this is a department within Aurus. The division deals with issues of the quality management system to the standards of the modern global automotive industry. Believe me, very soon everyone will be able to see it first-hand when we launch the plant.

— As regards the future destiny of Aurus as a luxury car brand, is there any strategic plan for long-term development?

— The two main products which we are focused on now are the Senat Sedan and the Komendant SUV. It should be added that together with the NAMI we are also considering the potential of the Arsenal minivan. This model may also be considered in the future as an addition to our product line. In the longer run, nobody is planning to stop, so of course there will be both modernization of the cars, and a possible expansion of the model range. But it’s too early to discuss this now.

— Is the starting price of the Senat Sedan of RUB 18,000,000, which was announced at the opening of the showroom in Moscow, still applicable today? Have you managed to keep it despite the ruble’s devaluation?

— Yes, we continue to abide by this statement. But I want to point out that there are practically no standard cars in the luxury segment of the car market that Aurus operates in. Customer expectations are highly diverse, and each car is individually tailored, so the final price of the car depends on the requirements of the particular customer.