Russian bikemaker Ural has weathered a lot of storms in its 80-some years of existence. In the last two years alone, the company has struggled mightily with the vagaries of the global pandemic—shipping container shortages, logistics SNAFUs, supply chain issues, etc.
Now, on top of everything else, Russia's invasion of Ukraine and the ensuing sanctions—not to mention sweeping, worldwide anti-Russian sentiment—has forced the company to suspend production and caused a kind of existential crisis. What's a mom and pop—or, well, mama i papa—bikemaker to do in the face of sanctions and a wartime economy?
In mid-April, 2022, I sat down (virtually, natch) with Ural CEO Ilya Khait to ask him that very question. How is Ural dealing with the current chaos? How is the company weathering the storm, and what does the immediate future hold for our friends from Irbit?
What was the feeling with regards to the possibility of war within Russian business circles? Did you and your colleagues think it was merely saber-rattling or did you think Putin would actually roll tanks into Ukraine? Did you, or were you able to, take any initial precautions against disruptions caused by the conflict before it started?
We didn’t expect this development, and as far as we can tell all, business in Russia is in shock. We, just like everyone else, were totally consumed by adjusting to and dealing with covid-related supply chain and logistical bottlenecks. We had a huge number of orders from all the markets around the world (North America, Europe, Japan, Australia, China) and were trying to figure out how to fulfill them, streamline the supply chain, and increase production capacity.
The situation that threw red flags in the fall of 2021 was the deterioration of Belarus/EU relationships and following border-crossing congestions. We tried to find alternative delivery routes to Europe and increase the number of containers in transit as quickly as possible. We did have a hunch that these events (on the Belarus border) may be followed by, if not escalation, then at least by slow deterioration. We made sure to move all our banking to those banks that if they were to be affected by sanctions would be the last ones on the list.
Do you still have inventory to sell, or are the bikes currently in dealerships all the Urals there are for now?
There are two shipments of the bikes on the way to the US. Other than that, what’s on dealers’ floors is what’s available until we resume production and shipments.
Have the sanctions affected you in other ways aside from the production pause?
Yes, two of our dealer inventory flooring companies canceled our contracts, effectively taking away dealers’ ability to finance Ural inventory. Some of the suppliers notified us that they can no longer supply our factory in Russia with product. Tariffs of course were raised in Canada, Australia, and the US. Japan is implementing an embargo on Russian-made products. Last but not least, our team has probably set the world record for 'the fastest processing of the seven stages of grief in powersports industry'.
You mentioned on an earlier call that you were pursuing various ways to restart production, including assembling bikes in other countries. How's that plan progressing?
Yes, the plan is progressing at full speed. We are setting up assembly facilities in Petropavlovsk, Kazakhstan, about 600kms (373 miles) southeast of Irbit. The factory in Irbit will continue manufacturing frames and body parts. Motorcycles will be assembled and shipped from Kazakhstan to our customers around the world.
In the last ten years, we’ve put a lot of work into outsourcing the highest quality components. Our strategy was to discontinue our own manufacturing of the parts for the powertrain as well as several other key components. Today, Ural is 80 percent made of parts we purchase from suppliers around the world. This prepared us for and simplifies the current task of moving the assembly. We essentially are changing the address for shipping these components to another location. That’s what makes it feasible to assemble bikes in this new scenario.
We plan to resume parts shipment from the new location as early as May, 2022, and resume bike shipments in August. It’s obviously not an easy task and we will have to organize our workforce so we can all adjust to this new reality.
Ural prides itself on its Russian heritage. How is that affecting the company in a time of strong anti-Russian sentiment throughout the world?
The sentiment does affect us based on the comments on social media. But then again, Ural has never been a mass product. We think that the intellectual level of Ural customers allows them to discern and see the forest for the trees. We stated our opinion on what’s going on in the first hours. We expressed it as clearly as it could possibly be expressed. Everyone knows our stand on this war, so from here on people can make their own decisions and choices about Ural.
Part of Ural's identity has always been our ability to overcome any challenges, adversities, and obstacles. This move of the assembly production is an example of what Ural is and it is becoming yet another part of our story. Being Ural we could not have acted any differently than figuring out how to overcome the current situation no matter how catastrophic it is.
Do you think that Ural will have to pivot away from identifying so heavily with essential Russianness to survive in the long run, or is this a temporary measure?
You don’t get to choose the country you are born in, what you get to choose is everyday decisions and relationships. Russian heritage is part of our DNA, which can be interpreted in many ways. We will remain who we have always been: a fiercely independent company, tough as nails, resourceful, and tenacious.
Do you have any plans for the future you'd like to talk about, or are you simply focused on day-to-day survival?
We have plans, but we have to postpone them. When the time comes we’ll talk about it.
Finally, is there anything else you'd like to say to all the Ural fans and supporters throughout the world?
Yes, we are eternally grateful for the support of our partners and our customers, and with it, Ural is going to be alright. Like everyone else, we pray for peace and hope this disastrous war will soon come to the end.