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Business news, 05.05.2006 15:16

Nissan factory in St Petersburg

Nissan St Petersburg has persuaded the Japanese car manufacturer Nissan to build a factory there as part of an over-arching strategy to turn itself into a Russian Detroit. Nissan is following in the footsteps of Ford and Toyota, which have already chosen the St Petersburg region as a manufacturing base due to its low labour costs, generous tax breaks and proximity to Europe's markets.

As car factories in Western Europe are wound down or shut because of high labour costs, production is moving east, and Russia, particularly St Petersburg, is hoping that Europe's loss will be its gain. Construction of the $200m Nissan plant will be completed in 2009. It will initially produce 50,000 cars a year, creating 750 new jobs; Nissan has yet to decide which model the factory will build.

The St Petersburg region is already home to a Ford assembly plant which turns out 36,000 Focus models a year, which is likely to rise to 100,000 once the factory is working at full capacity. Meanwhile Toyota's St Petersburg plant is due to start producing its first Camrys next year. Initially it will produce just 20,000 cars a year, but the company says that number will gradually rise to 200,000.

According to industry analysts, Russians' appetite for new cars is nowhere near being satisfied. With 167 cars per 1,000 people, Russia lags far behind neighbouring eastern Europe, which has 323 vehicles per 1,000 people, and car sales here are set to explode from 1.8 million a year now to 2.8 million annually by 2010. Even then demand will outstrip supply, and it is estimated that only 50 per cent of foreign cars bought in Russia in 2010 will be made in Russia, with the rest being imported.

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