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Business news
St. Petersburg aims to become Russia's Motor City
06.26.2006 15:03

car_industry Russia (Kyodo) Russia's brisk economic growth and rising purchasing power are drawing Japanese firms, most notably automakers, into the country like a magnet.

Toyota, which is building a plant in St. Petersburg with production slated to start in late 2007, is eager to exploit the quality deficiencies of Russian-designed and built vehicles. Nissan Motor Co. also will build a plant in the city and begin production in 2009, which will make it the second Japanese automaker to produce cars in Russia.

Business leaders in St. Petersburg have growing expectations that investments by the two major Japanese carmakers will help transform the nation's second-biggest city into a Russian Detroit.

Local industry sources said that General Motors Corp. and DaimlerChrysler AG of Germany are also considering setting up plants here. Ford Motor Co. already assembles vehicles at its St. Petersburg plant.

"Investments by Toyota and Nissan would increase the likelihood that St. Petersburg will become a Russian Detroit," said Anton Savoschev, vice president of the St. Petersburg Chamber of Commerce and Industry.

"We expect them to boost the economy of St. Petersburg through job creation and tax revenue increases. It's also good to have modern plants and workplaces." Savoschev also expressed the hope that Japanese investments will spur technology transfers to Russia's automobile industry.

Russia's desire for Japanese investment is evident. St. Petersburg Gov. Valentina Matvienko said earlier this year that her city was in talks with six Japanese companies to attract auto-part manufacturing plants.

Toyota Boshoku Corp., a car-interior parts maker in the Toyota group, launched a subsidiary in the city in April, with an eye to beginning operations in December 2007 to supply seats for the Toyota Camry, which the carmaker plans to assemble 20,000 units a year here for two or three years and then raise it to 50,000.

Sales of cars in Russia rose to 1,767,000 units in 2005 from 1,609,000 the previous year, with sales of domestic makers falling but those of foreign brands increasing, according to the Feb. 6-12 issue of Russia's Expert business weekly.

The Russian government, which has vowed to revitalize Russia's auto industry, projects that figure will increase to 2.5 million units in 2010. Russian auto-parts manufacturers estimate annual potential demand for automobiles at 5.5 million to 6.0 million units.

In 2005, Toyota ranked second in foreign cars sold in Russia, selling 66,000 units, up 39 percent from a year earlier. Hyundai Motor Co. of South Korea topped the list with some 87,000 units, up 73 percent. The rankings were unchanged from a year ago.

Along with Nissan, Mazda Motor Corp. and Mitsubishi Motors Corp., South Korea's Kia Motors Corp. and GM Daewoo Auto & Technology Co. are among the top 10 in foreign car sales in Russia.

Experts have hailed South Korean makers' savvy business strategy in Russia. They entered into the market earlier than their Japanese rivals and offered lower-priced products, with Hyundai and Kia tying up with Russian automakers for vehicle assembly to cut costs.

But experts do not see the South Koreans as a threat to the Japanese.

News source: search.japantimes.co.jp
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