Peugeot to Build Major Russian Plant

Factory will produce 150,000 cars per year

French car maker PSA Peugeot Citroen on Jan. 29 signed a deal with Russian authorities to build a massive car plant southwest of Moscow, in the Kaluga region, to serve the "priority" Russian market. Under the deal Peugeot will invest 300 million euros (US$443 million) in a factory capable of producing 150,000 cars per year. Construction will begin later this year, with the first mid-range Peugeot and Citroen cars rolling off the production line in 2010, the company said.

The firm's first plant in Russia marks a major push into what the company's director of industrial projects, Didier Aleton, described as one of three "zones of priority development" for the firm, along with China and South America. Peugeot has said it hopes to produce 100,000 vehicles in Russia in 2010, with output eventually growing to 300,000. The rising revenues of many Russians as well as the appearance of car purchase loans have encouraged a spending spree on foreign branded cars as Russians leave behind their Soviet-era models.

Sales of foreign brands in Russia went up by 63% in the first 11 months of 2007 compared with the same period in 2006, according to data published last month by the Association of European Businesses in Moscow. Fellow French car producer Renault announced a major deal last month to buy into Russian car maker Avtovaz and foreign carmakers have been lining up to set up shop.

Peugeot is in talks with Mitsubishi Motors to join the Kaluga project and produce its cars on the same site, Peugeot's Aleton said, although negotiations could take another "three or four months." It is unclear how this would effect Mitsubishi's plan, announced last month, to invest $200 million in its own plant in the same region. The Kaluga region, located about 155 kilometers (100 miles) outside Moscow already hosts rival factories run by Volvo and Volkswagen and was selected by Peugeot due to its efficient business climate, Aleton said. Last year Sweden's Volvo signed a 100 million euro deal to build a truck factory in Kaluga, expected to produce 10,000 Volvo trucks and 5,000 Renault trucks annually.

Toyota opened a new plant in Saint Petersburg last month intended to produce 50,000 models annually within two years.

Copyright Agence France-Presse, 2008

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