18:58 GMT +320 February 2018
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    GM bets on Russia

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    MOSCOW. (RIA Novosti economic commentator Oleg Mityaev) - The world's largest automaker, General Motors, opened a new plant outside St. Petersburg on November 7, doubling its Russian production capacity despite the global financial crisis and rapidly slumping sales.

    This important step shows that Russia is becoming one of the few profitable markets for international automobile manufacturers amid a deteriorating global market.

    The new plant in Shushary, outside St. Petersburg, a $300 million investment, will initially manufacture 40,000 cars a year. Total planned output is between 70,000 and 75,000 cars annually, nearly doubling GM's total capacity in Russia. The current combined capacity of GM-AvtoVAZ and GM's other Russian partners is 100,000 cars. The new GM plant in Shushary will employ 1,500-1,700 people.

    Initially, the new plant will manufacture Opel Antara and Chevrolet Captiva SUVs. By mid 2009, GM plans to launch production of a C-class passenger car, the Chevrolet Cruze, in Shushary. It's possible that the Cruze could form the bulk of the new plant's production. Another model planned for Shushary is the new Opel Astra.

    GM, now the leading foreign car manufacturer in Russia, intends not only to maintain its position but to boost production and sales in Russia. According to GM, sales in 2008 grew by 44% through September and are 23% ahead of Russia's overall market growth. By the end of 2008, GM forecasts over 400,000 cars sold in Russia, including imports. It also expects Russia to become Europe's biggest car market in 2009.

    GM, as well as other makers which have been building plants in Russia, is hoping to compensate for losses in other markets.

    Many multinational automakers are stalling the release of October sales figures, which has become one of the worst months in car sales history. Analysts, however, have already calculated general figures. The world's largest car market, the U.S., plunged to a record low, falling 32% to 1991 levels, with an overall decrease of 10% for the first 10 months of the year. This forced U.S. automakers, including GM, to shut down plants in North America. In the same period, car sales fell 7% to 8% in Germany and France, and 13% in Japan.

    Although car makers had put high hopes on the fast developing BRIC countries, Brazil, Russia, India and China, car sales are wavering in both India and China.

    What's really going on in Russia amid unfavorable global developments? In the first half of 2008, car sales in Russia soared by 41%, reaching 1.7 million units. The financial crisis, gradually spreading across the world, however, has brought down demand for cars here as well. Industry analysts who estimated car market growth in the first nine months of this year agree with GM forecasts of 22% to 23%.

    October is expected to be down as in other countries, though not as bad as in the United States. In Russia, car sales will decrease by 5% to 7%. By the end of 2008, Russia's car market growth is still likely to be about 15% or 16% instead of the predicted 25% to 30%. This is still significant growth.

    Therefore, GM's expectations, as well those of its competitors, regarding sales growth in Russia in 2009, could pan out. The growth rate, however, is likely to be much less than in the first half of 2008. Solvent consumers are likely to benefit from growing competition in the domestic market, as car makers compensate for an oversupply of product with price reductions.

    The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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