Mitsubishi Motors and PSA Peugeot Citroën to set up joint venture in Russia

 

Mitsubishi Motors and PSA Peugeot Citroën of France said Monday that they would set up a joint venture in Russia to produce cars starting in 2011.

The factory in Kaluga, located 180 kilometers, or 110 miles, southwest of Moscow, will produce midrange sport utility vehicles for the Mitsubishi, Peugeot and Citroën brands, as well as midsize Peugeot and Citroën vehicles, with an overall capacity of 160,000 vehicles.

Production is due to start in 2011, the companies said.

The two automakers had separate deals with the Russian government granting them financial incentives to assemble cars in the country, and had said they were open to joining hands with undisclosed partners.

Christian Streiff, Peugeot Citroën’s chief executive, said at a media briefing in Paris that the company would invest €300 million to €350 million, or $470 million to $550 million, in the joint venture.

The Kaluga factory will have annual capacity of 150,000 cars in 2010. Peugeot will hold a majority stake in the factory, said Fumio Nishizaki, a Mitsubishi spokesman in Tokyo.

The plant’s ground-breaking ceremony is scheduled for June 10.

The two automakers already have an operational link in which Mitsubishi Motors builds 4X4 vehicles like the C-Crosser and Peugeot 4007.

Russia is expected to outstrip Germany as the biggest car market in Europe in a few years and has become a priority growth area for many global automakers.

Mitsubishi Motors sold 107,000 Outlander SUVs, Lancer sedans and other cars in Russia in the business year ended on March 31, and it is expecting a 31 percent rise, to 140,000 cars, this year.

Peugeot Citroën wants to sell 100,000 cars in Russia by 2010.

Carmakers including Renault, Peugeot’s smaller French rival, are building factories in Russia, one of the world’s fastest-growing markets.

Midsize cars represent half of sales in the country, Peugeot said.

Volkswagen, Europe’s largest carmaker, opened a factory in Kaluga last year in an attempt to triple its share of the Russian market. Ford Motor also has a factory in Russia.

Peugeot Citroën, which last year made it a company priority to expand in Russia, said that midsize vehicles accounted for 50 percent of sales in the Russian market, and that SUVs would become a key segment there.

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