Daimler Moving Closer to New Plant in Russia

ST. PETERSBURG – Daimler remains in active talks with the Russian government and potential partners for construction of a new car-assembly plant in the country, company officials say.

Among the possible sites for the plant are Tatarstan, Samara and St. Petersburg.

Daimler plans to design the plant to accommodate output of five different Mercedes models, the S-, E and A-Class cars and ML and GL CUVs, according to Yuri Spiridonov, president of the Russian Investment Agency. Production will be earmarked for both the domestic market and export.

Construction is targeted to begin by the end of the year and be completed by the end of 2016. The plant is expected to reach capacity by 2017. Planned production volumes have not been disclosed.

St. Petersburg is considered the odds-on favorite to land the plant, according to sources close to Daimler, due to its geographical advantages and status as one of Russia’s largest seaports.

If located here, the plant could be built on a site in Shushary, a municipal settlement in the city’s Pushkinsky District. Toyota, Scania, MAN and Magna already have operations there.

Another possible site in St. Petersburg would be near the Kirov plant, one of the oldest and largest Russian machine-building operations.

Tatarstan and Samara also are attractive due to existing auto parts production in those spots.

A final decision is expected to be announced by Daimler at the World Economic Forum in St. Petersburg in June.

Initially, the automaker planned to launch production at the site of the former ZIL plant (a major Russian automobile, truck and military-vehicle manufacturer) in Moscow. However the Russian government refused to give Daimler access to the plant due to its location in the heart of Moscow.

Local assembly is critical for Mercedes-Benz, which was unable to participate in recent bids for vehicle sales to various government agencies due to a lack of domestic production. Mercedes cars routinely have been in high demand among Russia’s top officials. State contracts reportedly account for 3% of the brand’s car sales in Russia.

Ministry of Industry and Trade analysts say establishment of local production is a key part of a long-term strategic plan of Daimler, which forecasts sales of 150,000-200,000 cars in Russia during the next five years. Local production would allow the German automaker to avoid import duties on these vehicles.

Daimler currently operates a joint venture with Kamaz, which specializes in the production ofMercedes-Benz trucks in Naberezhnye Chelny. In November, Daimler increased its stake in Kamaz from 11% to 15%.

In addition, the company produces its Mercedes-Benz Sprinter Classic minibuses jointly with GAZ Group in Nizhny Novgorod.