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Russia: Auto Industry Ready To Speed Up

Moscow, 10 March 1997 (RFE/RL) -- Economic experts are saying that Russia's automotive industry is poised to take off, but Moscow representatives of the major U.S., European and Asian automakers say conditions remain volatile and unpredictable.

Industry officials report that General Motors' Opel unit; Ford Motor Company; Volkswagen's Czech subsidiary, Skoda; Mercedes-Benz; BMW; Renault; and Kia Motors Corp. of South Korea all have substantive planning underway for assembly and production in Russia.

Daewoo already has a plant operating in Uzbekistan. GM is now turning out 500 Chevrolet Blazers each month from an assembly operation in Yelabuga, in the Russian republic of Tatarstan.

The automotive department of the Ministry of Industry projects 2 percent growth in Russian car production this year. That would reverse a five-year slump, in which domestic auto sales fell 40 percent. Steel industry anjalysts remain cautious, however, predicting steel demand for auto production to remain flat this year, as automakers struggle to find the money to buy more raw materials.

Renault signed a contract last year to supply 40,000 two-liter gasoline engines with fuel injection for assembly in a new Moskvich model, called Aleko. French officials say the deal is worth about 80 million U.S. dollars. The Renault-Moskvich contract lies fallow so far, however. The Moscow city government has not acted on a promise to rescue Moskvich, and take over a controlling bloc of shares held by the federal government. This leaves the company debt and its management in limbo. Other foreign automakers have encountered simiilar deal killers.

Western auto marketers also have discovered that Russian demand for foreign cars is shifting. Skoda's Felicia, at $11,500 retail, has replaced Volvo at the head of the market. The locally made Lada costs $12,000.

Current market analyses by Western carmakers indicate that Russians are buying automobiles at the rate of about 800,000 a year. The analysts predict that the market will top a million units within five years. They expect price to be the key factor in market share.