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Christopher Bruce2013-01-09 18:52:31

Russian Growth May Come Slower Than Expected

There is a threat of overcapacity in the market

Volkswagen has a large campus of factories in Kaluga, Russia

The Russian market has been the major growth region of the European car market in the last several years. It is already the second largest market in Europe for car after Germany. The problem is that investors may be going to far in the market. So many suppliers and auto makers building factories in Russia brings the danger of overcapacity to the region and threatens to turn a growth market into a bubble. 

Russian auto sales saw little gain in November and are expected to grow little in the next several months. 

Despite the possible slowdown in the market, Renault, Nissan and Volkswagen are all investing heavily in the market. VolkswagenVolkswagenVolkswagenGermany, 1938 > present98 models
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is adding an engine factory to its campus in Kaluga, and NissanNissanNissanJapan, 1932 > present159 models
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-RenaultRenaultRenaultFrance, 1898 > present189 models
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just bought a controlling stake in AvtoVAZVAZVAZRussian Federation, 1966 > present8 models
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. Nissan will use some of this capacity to build its new DatsunDatsunDatsunJapan, 1931 > 198636 models
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Part of the reason is that if cars do not sell in Russia, they can be exported to other Eastern European countries, which are also experiencing growth. Also, it is much easier to import cars to the rest of Europe compared to exporting from China. 

The new auto manufacturers mean more parts suppliers in Russia. Parts supplier Magna has partnered with a Russian parts supplier to build a six-factory campus near Kaliningrad. It will supply parts to Land RoverLand RoverLand RoverUnited Kingdom, 1978 > present15 models
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, SubaruSubaruSubaruJapan, 1953 > present34 models
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, BMWBMWBMWGermany, 1918 > present87 models
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, KiaKiaKiaRepublic of Korea, 1944 > present52 models
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, OpelOpelOpelGermany, 1863 > present85 models
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and ChevroletChevroletChevroletUnited States of America, 1911 > present82 models
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"To be competitive you have to have local component production," said Oleg Deripaska, owner of Russian car builder GAZ. 

Source: Automotive News Europe





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