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The results of the import substitution strategy on the example of a domestic manufacturer

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Sergey Lebedev, CEO of Group Atlantic Teplolux LLC.

Despite the difficult situation with the supply of raw materials and logistics, a number of Russian companies have maintained and even increased production in these difficult times. The cable industry has previously felt confident and independent, dominating the Russian market. Yes, the relevance of import substitution in Russia has increased dramatically against the backdrop of a changing economic environment, but the issue of replacing foreign products with goods from Russian manufacturers has been raised before.

armonti1.jpgOur company adopted an import substitution strategy 2.5 years ago. Thus, during this period, Teplolux successfully implemented 11 projects for the introduction of both completely new and updated products based on components manufactured and purchased in the Russian Federation, which were previously supplied from abroad.

Almost all components for cables are produced in Russia: both metals and plastic compounds. There are, of course, specific products like high-temperature cables, the materials for which were imported from Europe and Asia. The company experienced some difficulties in late February and March due to the refusal of European and Japanese companies to continue working with Russia. But the market is wide, we have found analogues that even surpass the materials, the supply of which was stopped. In fact, the current situation has become an occasion to revise the designs and materials that were used earlier and find more modern options. Therefore, the cable direction feels very good. If the same need for cable continues in the country, everything will be fine.

So, for example, a foreign supplier of one of the key components of cable and wire products - heat-resistant insulating material - was replaced (after a series of successful tests) with a Russian manufacturer. At the moment, together with Russian chemical technologists, work is underway to modernize the plastic compound formulation, taking into account the technological features of the previously used material, which in turn will have a positive effect on the manufacturability of the process.

An identical scenario has been implemented with another number of foreign suppliers of extrusion and molded plastic compounds. The previously supplied thermoplastic elastomer from the USA and Germany was replaced with a material from a Russian manufacturer.

Alternatives to Austrian-made cross-linked polyethylene have also been found on the territory of the Russian Federation, and we are completing the necessary tests to launch mass production.

If we talk about electronics, then everything is not so simple. For some time we had problems related to the supply crisis. This concerned both logistics and the general lack of electronics, and now they began to refuse us altogether. It is simply impossible to replace Western products with Russian counterparts, because we do not produce them.

We develop and manufacture products ourselves, but the chips are supplied from other countries. "Teplolux" had to, while retaining the case, actually reinvent products on a new electronic platform: re-lay boards and rewrite programs. But in general, we are coping with these tasks, although the crisis, of course, is not over yet: the company regularly receives new refusals, and often under already concluded contracts.

The difficulties that arose required new investments, since it was necessary to buy components more expensively and contract for a longer period. But we see a good increase, because the quality has not deteriorated, and the resulting shortage of electronics, due to the fact that Western competitors left the market, we cover with our products.

In terms of revenue, the company is also ahead of schedule. To date, the prices for our products have actually come to the pre-crisis level, and even for some positions have become lower. This is especially true for products that are made from Russian raw materials.

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In addition to materials, services are also subject to import substitution. In particular, the Group Atlantic Teplolux enterprise in recent years has practically completed the stage of changing the company that carries out regular maintenance of production and technological units (molds, injection molding machines) from China to a Russian enterprise. Thus, the growing volume of orders within the country contributes to reaching a new level of production of the Russian manufacturer.

An additional fact of the effectiveness of the import substitution program is the receipt of the next annual act of examination in the Chamber of Commerce and Industry, which allows us to continue to issue certificates of origin ST-1, confirming that the shipped products are Russian-made. The presence of certificates of origin for shipped export products, in accordance with Government Decrees 311 and 312 of 03/09/2022, prohibiting and restricting the export (export from the territory of the Russian Federation), of certain types of goods until 12/31/2022, gives us the opportunity to export products. A very large range of our products was included in the lists of goods prohibited for export, and without certificates of origin, export in 2022 would be almost impossible. We have not lost our Customers abroad.

The chosen import substitution strategy of Group Atlantic Teplolux did not bypass the IT sector. Since the end of 2021, all processes within the company have become more reliably controlled through the transition to 1C ERP, which successfully withstands many years of competition with foreign manufacturers: Microsoft, SAP and Oracle.

Thanks to an effective import substitution strategy, the R&D center of the enterprise annually develops new types of products and produces a wide range of solutions for a comfortable and safe life, including all types of electric underfloor heating, anti-icing and snowmelt systems for ramps, roofs, open areas. The proposed solutions are trusted by millions of Russians, as they have raised their quality of life to a new level. Group Atlantic Teplolux products are presented in many large DIY chains, are popular with developers, installation companies, large distributors, as well as in municipal institutions (gardens, orphanages, schools, hospitals).

Using the example of Group Atlantic Teplolux, we can safely declare that today business enterprises are much less dependent on Western goods due to the chosen strategy, which allows our manufacturers to increase serious competition to Western companies.

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