Russia Lands Mercedes Plant After False Start

ST. PETERSBURG – The Russian government  approves a Mercedes-Benz assembly plant with annual capacity of 25,000 units in an industrial park in the Solnechnogorsk district of Moscow.

Production is to launch in January 2017 under terms of a 10-year investment contract to be signed in coming weeks between Mercedes parent Daimler and the Russian Ministry of Industry and Trade, according to Vsevolod Babushkin, deputy director-department of transport and special machine-building.

The project will involve the participation of truck maker Kamaz, a longtime partner of Daimler in Russia.

Andrey Rodionov, corporate affairs director of Mercedes-Benz Russia, says the project is consistent with the German automaker’s strategy to establish production close to sales markets.

Daimler sees huge sales potential for Mercedes-Benz cars in Russia, which accounts for less than 0.2% of the brand’s global sales. According to WardsAuto data, Mercedes has sold 17,802 light vehicles in Russia in the first five months of 2016, down 17.9% year-over-year.

Mercedes nearly outsells German luxury rivals Audi and BMW combined in Russia, but Audi and BMW deliveries in the country for the same period were down 13% and 4%, respectively.

The newly announced project is not Daimler’s first attempt to produce Mercedes models in Russia. The automaker in 2015 announced plans to build a plant, but canceled the project as Russia’s business environment deteriorated, taking auto sales down with it.

BMW manufactures cars in the far western province of Kaliningrad with local partner Autotor. The companies earlier this year announced plans to spend €1.5 billion ($1.7 billion) to expand the plant, but again the Russian financial crisis scuttled that investment.

Rodionov also says media reports Daimler will build a new Mercedes plant in Poland rather than Russia are inaccurate. The automaker is investing €500 million ($565 million) in a facility in Jawor, Poland, that primarily will build 4-cyl. Gasoline and diesel engines.