Volkswagen to launch production in Russia

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MOSCOW. (RIA Novosti political analyst Alexander Yurov) -- Volkswagen has finally decided to build its own plant in Russia, setting something of a record along the way.

Rumors about the German automotive giant's plans to set up an assembly plant in Russia first appeared almost a decade ago. Over this period, Ford has launched production near St. Petersburg. Toyota set up a plant construction site nearby almost a year ago. Renault has started to produce cars in Moscow. Korean manufacturers are enjoying a fruitful partnership with Russia. Some German carmakers also have projects in Russia, one of which is the assembly of BMW cars in Kaliningrad. And now, at long last, Volkswagen is coming to Russia, which, however, is still a remarkable event. Its total investment in a Russian assembly plant may exceed �300mln.

Volkswagen demonstrated surprising competence when seeking the site to enter the Russian market. Many have strived to attract the famous company - St. Petersburg, the Yaroslavl, Vladimir and Moscow Regions, Udmurtia - Volkswagen officials have visited everywhere. And each of the above regions hoped to host the German concern. No wonder: each has had car-manufacturing experience. However, Volkswagen has made the most unexpected choice - it will build a plant in Kaluga.

However, there is nothing surprising about this choice. Kaluga is one of Russia's fastest developing regions. Last year, its GDP growth made almost 6%, real incomes of the population are growing fast and rose by 14% last year. The local authorities say the region's economic growth was boosted by investment, which in 2005 increased at the same rate as the GDP. Investment in beer breweries has done a great deal to shape up the region's image. Some of the best-known brands of beer have been made here since the 1990s, and Czech beer has a place of prominence. By coincidence, Volkswagen's first Russian-made cars will be the Czech Skoda Octavias. It looks like the time-tested beer production attracted the carmaker to Kaluga.

Volkswagen's decision to build a plant in Kaluga has great importance for Russia. The amount of planned investment in the project is one of the largest among car manufacturers on the Russian market. The total amount of investment adds up to �270mln, and another �100mln may be invested in automotive forging production. (Cf.: Renault spent �230mln to start making Logan cars in Moscow). In addition, Volkswagen plans to produce 115,000 cars annually in Kaluga, with the first cars to appear in the autumn of 2007. Renault said 60,000 cars would be produced at the first stage. Volkswagen also promises its cars will cost under �10,000, the most popular price range.

Unlike other carmakers, the German concern has not specified what car makes it will produce. The concern's assembly plans include Skoda Octavia, Volkswagen Golf, Polo and Passat. But all these brands cost more than �10,000. There is speculation about a mysterious model which has yet to be developed exclusively for the Russian market.

This is an important question for Russian drivers as Volkswagen Golf, Polo and Passat are very popular, whereas Skoda Octavia has a reputation of an expensive car with tricky maintenance, and VW's decision to start its production ahead of other makes surprised many. Perhaps Brazilian Pointer will be taken as the backbone? But it is too modest a car to fit in the �10,000 category.

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