Toyota unveils new car plant for booming Russian market

SAINT PETERSBURG, Dec. 21, 2007 (Thomson Financial delivered by Newstex) — Toyota Motor Corp inaugurated a new car assembly plant in Saint Petersburg on Friday as the Russian car market booms and the Japanese automaker aims to become the biggest producer in the world.

Toyota CEO Katsuaki Watanabe attended the opening of the Shushary plant, which will assemble around 20,000 Toyota Camry vehicles per year. Russian President Vladimir Putin was due to tour the factory later Friday.

‘There has been unprecedented growth in the Russian market. It has doubled in the last five years. We think the potential of the market is enormous,’ Watanabe said at the ceremony.

Russian Economic Development and Trade Minister Elvira Nabiullina said the opening of the new factory was ‘a significant event for the Russian economy as a whole’ because it would bring new technology and management know-how.

Production at the 202.4-million-dollar plant is set to rise to 50,000 models within two years and could eventually go as high as 300,000 vehicles, Watanabe said.

Shushary is part of what Russian officials are calling ‘an automotive industry cluster’ growing up in and around Saint Petersburg, where Ford already has a major production facility.

The cars made here are expected to help Toyota meet its target of producing 9.9 million vehicles in 2008, well ahead of General Motors (NYSE:GM) ‘ estimate of 9.3 million vehicles. Toyota already hopes to edge ahead of its rival as the globe’s biggest producer this year.

Russia is one of the biggest car markets in Europe and is expected by auto industry analysts to overtake Germany to become the largest within the next few years as the country’s economy continues to boom.

‘The Russian market is one of the most dynamic in the world,’ said Andrei Fyodorov, an auto industry analyst at Alfa Bank in Moscow.

Eduard Faritov, an analyst with Renaissance Capital, a Russian investment bank, agreed and said: ‘The high rates of growth will continue.’
There are currently around 185 cars per 1,000 people in Russia. That figure in western European countries is between 400 and 600 and Russia is expected to make up the difference within a few years.

That prospect, as well as incentives from the Russian government, has brought a flood of foreign carmakers, mainly based around Saint Petersburg and in the southern region of Samara.

Ford, General Motors, Renault and Volkswagen are among the foreign carmakers with plants in Russia. Nissan is building a new plant near Saint Petersburg and Hyundai has announced plans to set up in the same region.

Analysts warn however that foreign companies face obstacles to expanding production because of a lack of highly-skilled personnel and the potential from protectionism to promote domestic carmakers.

The main loser of the foreign auto surge has been Avtovaz, producer of the infamous Lada and Russia’s biggest car producer, which was built by Italy’s Fiat in the 1970s in the Samara region in southern Russia.

According to industry data cited by the Russian business daily Vedomosti, Toyota could beat state-controlled Avtovaz in terms of sales in Russia this year as the Soviet-era car giant’s share of the market plummets.

‘Avtovaz just can’t compete. Its models are very old, although the company is now taking steps to resolve this problem…. Its share of the market is falling catastrophically,’ Faritov said.

Avtovaz has a joint venture with General Motors that makes the Chevrolet Niva and earlier this month the ailing company unveiled a deal to sell French automaker Renault a 25-percent stake.

Source : WSJ

Share This