New Rival: Russia! Russian Car Industry on a Surge

From Mac Gordon 05-24-2013

St. Petersburg, Russia-Long a non-player in the global auto industry, the Russian car industry is harnessing its global partners to become a major producer of cars for the domestic market.

With the opening of the seventh Russian assembly plant owned by a foreign automaker, Russia has boosted its production of foreign cars to 1¼ million in 2012.

Foreign automakers have agreed to devote 60 percent of their Russian output to local components, including engines and transmissions.

The government-backed program in building seven assembly plants in Russia ended in 2011, when Hyundai's plant opened.

A Ford plant outside St. Petersburg opened the “incursion” of foreign auto plants in 2002. Ford was followed by Renault (2005), Volkswagen and Toyota (2007 each), Chevrolet (2008), with a Malibu-like sedan called the Lacetti, and Peugeot/Citroen/Mitsubishi, in 2010.

The surge in Russian sales of foreign cars led to 1.22 million retail deliveries in 2012.

Price Waterhouse analysts see the total rising this year to 1.33 million this year, with Russia's Ministry of Industry and Trade forecasting up to 4.17 million by 2020, of which 3.75 million will be produced in Russia.

The Russian government has agreed to eliminate duties on imported automotive components, in exchange for 60 percent of output in the seven “foreign” plants going to local suppliers.