Daimler Group's global official website recently announced that it will build the first factory to produce the Medes-Benz passenger car in Moscow, Russia. According to foreign media reports, this will be the first new investment by Western car companies in Russia since Russia was subjected to economic sanctions for three years.
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Daimler will invest more than 260 million US dollars to build a factory with a capacity of 20,000 cars. The factory will be responsible for the production of SUVs and E-class cars. The plant will be the first Daimler plant to produce passenger cars, located about 40km northwest of Moscow. The plant is scheduled to start in 2019 and the first car is expected to be rolled out in 2019.
Mercedes-Benz production director Markus Schaefer said: "The Russian market is strategic for Medes-Benz and a market with growth potential. By producing locally in Russia, Mercedes can not only be closer Russian customers can also strengthen the international competitiveness of Medes-Benz cars."
The new plant will be equipped with a complete production line and a paint shop. Daimler said that the new plant will bring more than 1,000 jobs and stimulate the work needs of local service providers and component suppliers.
Despite the downturn in the Russian economy and the unsatisfactory market conditions, Russia is still one of its important markets for Mercedes-Benz. According to data from the European Business Association (AEB), in 2016, Mercedes-Benz became the best-selling luxury car brand in Russia for four consecutive years, with a cumulative sales volume of 36,888 units.
Russia has long been considered a market with growth potential and was expected to surpass Germany as the largest single car market in Europe. However, due to the Ukrainian incident in Russia, Russia was economically sanctioned by Western countries. Under the combined effect of low oil prices and weak currency, the country’s economy was in a downturn and many new projects were stranded. The sanctions did not directly prohibit car companies from investing in Russia, but the potential complications still keep investors away. GM exited the Russian market two years ago. Russian sales also fell from the peak of 2012 to less than half.
In the Russian market, sales of luxury cars were better than those of popular mainstream models during the downturn. Last year, Mercedes-Benz Russia's sales fell by 11% year-on-year. BMW sales were flat year-on-year, and Audi's sales fell 19%. The European Business Association (AEB) and Ford Motor Co. believe that there are signs of recovery in the Russian market in 2017, which is expected to stop the recession. AEB predicts that the Russian market will increase sales by 4% this year.
It is reported that BMW has assembled the cars and SUVs in Russia through the local contract manufacturer Afdo Tor, using components from Kaliningrad, Russia. Audi produces cars and SUVs at the Volkswagen Group plant in Kaluga, Russia.
Daimler has worked with Russian manufacturer Kamas Kamaz to produce trucks, but has not yet produced passenger cars. The decision of the Russian Deputy Minister of Industry and Trade Alexander Morozov to build a factory shows the confidence of the car companies in the Russian market.