Automakers Get Down To Business In Russia |
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Anthony Fontanelle
June 5, 2007
At the AutoRussia 2007 conference that opened Tuesday at the Grand Hotel Europe, foreign-based automakers unveiled their investment plans for St. Petersburg. Detroit’s automakers also announced their plans to recuperate and be back to profitability in the near future. And Russia will form a significant part in the foreseen recuperation.
Russia has started to appear on automakers' radar screens as a market with an enormous growth potential that can no longer be ignored, according to the latest Global Auto Report. The General Motors Corp., the largest American automaker, said that it will open its plant by November 2008. The new facility from GM is built in the Shushary district on the outskirts of St. Petersburg. The $300 million-worth invested is projected to handle production capacity of 70,000 cars annually.
Richard Swando, the managing director of GM in the CIS, said that the Chevrolet Captive will be the main model produced at the plant, Interfax reported Tuesday. “Chevrolet Captive will be launched in November 2008, while the C-class sedan could be launched in April 2010,” Interfax cited Swando as saying. GM owns two production sites in Russia. With powerful product lines and trusted auto parts like the Chevrolet pickup motor mount, analysts say Russians will be undeniably captivated.
Speaking at the conference, Henrik Nenzen, the president of Ford Russia, promised to increase the automaker’s turnover in the territory by 50 percent this year up to $3 billion. In 2006, Ford Russia reported turnover of $2 billion. Increased transport costs are pushing foreign automakers to set up local production sites for the manufacture of components. “We are interested in localizing the production of all components,” Nenzen said. However he did not announce any related plans.
Conversely, the “Russian Detroit” is attracting component producers. The Canadian company Magna already owns a number of assembly plants in Russia. In January next year, the company will start the construction of a plant in Shushary.
According to Interfax, Maxim Sokolov, the Chairman of the Committee for Investment and Strategic Projects, said that the plant could be completed in a one and a half to two year period. At the moment Magna is undertaking exploration works on a land plot. The decree on projection and construction will be issued by the St. Petersburg government before the end of 2007, Sokolov said.
Fujio Hosaka, the managing director of the Nissan Manufacturing Rus, announced that their new plant in Kamenkais which is expected to start operation in January 2009 will initially produce one model and later could expand its assortment to three or four models. The initial production capacity will be 50,000 units annually. Hosaka added that it could be expanded to 500,000 units. Although at this stage all components will be imported, Nissan will consider localizing their production in the future, Hosaka said. According to Maxim Sokolov, investment into the plant will total about 5.5 billion rubles.
Russia is already one of the top ten global auto markets. In the previous year, Russia car sales accounts for 1.5 million units, surpassing Spain to become Europe's fifth largest market. However, with only 31 million vehicles in operation in Russia, a country with 142 million inhabitants, the vehicle penetration rate only stands at 0.2 per capita, in line with Mexico. But the figure is still notably lower than other Eastern European markets like Hungary and Poland. Russia's vehicle penetration is roughly one-third of the G7 average of 0.6 vehicles per capita. Other foreign automakers, such as Volkswagen, Toyota, Renault and Suzuki, also are rushing to set up new assembly facilities in Russia. Additionally, the Russian Industry Minister indicated late last year that foreign automakers plan to invest US$1.8 billion in new assembly facilities.
Source: Amazines.com