December 21, 2007 / 8:55 AM / 11 years ago

UPDATE 2-Putin sees car makers boom as Toyota opens plant

(Releads with Putin, details)

By Denis Pinchuk

ST PETERSBURG, Russia, Dec 21 (Reuters) - President Vladimir Putin forecast on Friday his home town of St Petersburg would become one of the world’s biggest car industry clusters as he opened Toyota Motor Corp’s (7203.T) (TM.N) first Russian plant.

“By 2015 St Petersburg alone will produce 1 million cars per year at five foreign-led plants,” Putin told an opening ceremony.

“St Petersburg is becoming Russia’s largest, and one of the world’s biggest, car making centres,” Putin said.

“Nice, good car,” said Putin as he examined a Camry sedan, the first premium-class car produced in Russia and a best seller in the United States in eight of the past nine years.

Putin said the car industry boom followed a government decision to impose high duties on imports of old cars several years ago and zero import duty on imports of components.

That prompted the majority of the world’s biggest car makers to launch assembly operations in Russia, lured by rising incomes and strong economic growth, spurred by record prices for Russia’s main exports — oil, gas and metals.

“Incomes are rising by 11-12 percent a year and it means that your (Toyota) ability to sell production locally will grow over time,” Putin told the plant’s managers.

Putin said Russians will buy around 2 million cars this year, more than in India, and the share of foreign cars was set to grow. He also said all car makers had been obliged to source components locally in the next three years.

TOYOTA’S BIG PLANS

Toyota, Japan’s top automaker, has invested 3 billion roubles ($121 million) in the plant which will produce 50,000 Camry sedans annually.

“We are hoping that one day the plant will produce 200,000 to 300,000 units per year. Then we can start considering production of budget-class cars,” Toyota President Katsuaki Watanabe told the opening ceremony.

He added that the company would reach its initial goal of 50,000 units per year within 18 months.

Sales of foreign car brands in Russia surged 63 percent in the first 11 months of this year.

General Motors Corp (GM.N), Ford Motor Co (F.N) and South Korea’s Hyundai Motor Co (005380.KS) all build cars in Russia, and Japan’s Nissan Motor Co (7201.T), Suzuki Motor Corp (7269.T), Mitsubishi Motors (7211.T) and France’s PSA Peugeot Citroen (PEUP.PA) are scheduled to follow.

Foreign car makers will assemble around 420,000 units this year, taking a 16 percent market share, while Russian producers, led by Avtovaz (AVAZ.MM) with its clunky Lada models, will further cut market share to 26 percent from 37 percent.

Imported cars still have the biggest market share with 44 percent, with the rest being old foreign imported cars. (Editing by David Cowell) (Reporting by Denis Pinchuk; Writing by Dmitry Zhdannikov)

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