Peugeot to build plant in Russia

Peugeot to build plant in Russia

By John Reed in London

Published: January 29 2008 20:50 | Last updated: January 29 2008 20:50

PSA Peugeot Citroe"n is to invest EUR300m ($442m) in a greenfield assembly plant in Russia in a big push into one of the world’s fastest-growing car markets.

Europe’s second-largest carmaker said it would start construction by the summer on the factory, which will have capacity to produce 150,000 cars a year and be on a 200-hectare site in Kaluga, 180km south-west of Moscow.

Peugeot said it would use the plant to produce unspecified mid-size vehicles, which account for about 60 per cent of sales on the Russian market. The carmaker’s mid-range includes the Peugeot 308 and Citroe"n C4 small family cars.

A company executive said the carmaker was not ruling out taking a partner at the plant. Mitsubishi Motors, which makes the Peugeot 4007 and Citroe"n C crossover vehicles in Japan, is seen as a candidate.

Volkswagen opened its own 150,000-vehicle capacity plant in Kaluga last November and Peugeot said it chose the location over a rival site in Nizhny Novgo-rod mainly because it had space for an adjacent suppliers’ park.

Swedish truckmaker Volvo last October began construction on a plant in the city that, when completed in 2009, will build heavy trucks under its own brand and that of Renault, its shareholder.

Christian Streiff, Peugeot’s chief executive, has identified Eastern Europe, along with South America and China, as a priority market for development as it seeks to capitalise on growth away from its core volume-vehicle business in France and western Europe.

Peugeot, which made 32 per cent of its sales outside western Europe last year, is trailing other global carmakers in such rapidly growing emerging markets as Russia and India, where it has no local production capacity.

The company aims to sell 100,000 vehicles a year in Russia by 2010 and 300,000 over the medium term. Peugeot’s vehicle registrations there rose by a third to 36,000 units last year, behind the market’s growth rate.

Renault, Peugeot’s closest rival, sold more than 100,000 vehicles in Russia last year, including low-cost Logan sedans. It made 35 per cent of its overall group sales outside western Europe.

Renault last month announced an agreement with Avtovaz, Russia’s largest domestic carmaker, on a partnership that would boost both companies’ local production capacity and make Russia a larger market for Renault than France.

General Motors, which already produces cars in Russia, and its US competitor Chrysler have held separate talks with Gaz, another Russian carmaker, about possible joint production.