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Car Assembly Bringing $5 Billion to Russia

According to an Economic Development Ministry official, the Russian government has signed four car assembly agreements with a total investment of over $5 billion. This includes the $1.1 billion Fiat plans to invest in the expansion of a local automobile factory and the creation of a factory to produce engines.

Dmitry Levchenkov, head of a special economics zones and project finance department of the ministry, told reporters that agreements had been signed with Sollers, Ford, Volkswagen, General Motors and an AvtoVAZ, Renault-Nissan, Izhavto and KamAZ consortium. He said, “up to 100,000 modern car models will be produced in the volume of up to two million a year,” and that the investment would be made within three or four years.

Car makers have rushed to Russia to use the advantages its market offers and the government has promised to relieve them of import duties on car components for eight years in exchange for assurance they will build at least 300,000 cars a year per production site by 2015.

GM will invest about $1 billion to expand and modernize its Russian facilities, while Volkswagen will invest $900 million, Levchenkov said.

Levchenkov added that Fiat, the only foreign company that has not signed up for the new regime, has committed itself to expanding production to 120,000 cars from the current 25,000 and building an engine plant in Nizhny Novgorod on the Volga.

Fiat, whose Russian partner Sollers dropped out unexpectedly earlier this year, is in talks with Sberbank to finance the project, Levchenkov said.

Industry analysts expect Russia to become the sixth-largest global auto market by 2020, up from its current position as number 10.

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