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Automobile industry

Japanese Automakers Flock to Russia Amid Economic Growth

Strategic Insights

— 1 min read

A surge in Russia's economic growth and rising purchasing power has drawn Japanese companies, particularly automakers, to the country. Toyota Motor Corp. is building a plant in St. Petersburg, with production set to start in late 2007, while Nissan Motor Co. plans to begin production in 2009. These investments are expected to transform St. Petersburg into "a Russian Detroit," with local industry sources citing General Motors Corp. and DaimlerChrysler AG as potential entrants. Business leaders in the city believe that the Japanese investments will boost the economy through job creation and tax revenue increases, as well as spur technology transfers to Russia's automobile industry.

Key Takeaways:

  • Toyota is building a plant in St. Petersburg, with production starting in late 2007, and plans to assemble 20,000 units of the Camry car in the first year, increasing to 50,000 units in two to three years.
  • Nissan Motor Co. will build a plant in St. Petersburg, with production set to begin in 2009, making it the second Japanese automaker to produce cars in Russia.
  • General Motors Corp. and DaimlerChrysler AG are considering setting up a plant each in St. Petersburg, while Ford Motor Co. already assembles vehicles at its St. Petersburg plant.
  • Sales of passenger cars in Russia rose to 1,767,000 units in 2005 from 1,609,000 the previous year, with sales of domestic makers falling but those of foreign brands increasing.
  • The Russian government projects that sales will increase to 2.5 million units in 2010, while Russian auto parts manufacturers estimate annual potential demand for automobiles at 5.5-6 million units.
  • Hyundai Motor Co. of South Korea topped the list of foreign cars sold in Russia in 2005, selling 87,000 units, up 73 percent from the previous year.

Statistics:

  • Sales of passenger cars in Russia rose by 158,000 units in 2005 (1,767,000 - 1,609,000).
  • Toyota ranked second in foreign cars sold in Russia in 2005, with 66,000 units sold, up 39 percent from the previous year.
  • The Russian government projects that sales of passenger cars will increase to 2.5 million units in 2010.

Sources:

  • Kyodo News International, "Japanese Automakers Flocking to Russia Amid Economic Growth," Feb. 14, 2006.
  • Russia's Expert business weekly, Feb. 6-12 issue.
  • Japan External Trade Organization, statement by Koji Karatsu, director of the Russia and Eurasia Division.

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