Chairman of the Volkswagen board of directors Bernd Pischetsrieder (left), Russian Trade and Economic Development Minister German Gref (right), and Kaluga oblast governor Anatoly Artamonov (center) attend the ceremony on October 28, 2006 for the laying of the foundation stone for the Volkswagen plant to be built in Russia's Kaluga oblast.
Photo: Dmitry Lebedev
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Russian Detroit Being Built in Kaluga
The foundation stone was laid in Kaluga on Saturday for Volkswagen's new factory, the largest foreign project in the Russian automobile industry. The factory will be surrounded by two technology parks, and legislation governing investment in the region is being changed to attract car parts manufacturers. The projects underway thus far are worth around $600 million. Kaluga, which announced its entrance into the automobile manufacturing industry only six months ago, is already being likened to a new "Russian Detroit" whose investment growth rate is overtaking that of rival St. Petersburg.
The foundation stone was laid for Volkswagen's (VW) factory in Kaluga on Saturday by Bernd Pischetsrieder, chairman of the company's board of directors, and Russian Trade and Economic Development Minister German Gref. Nikolai Lyubimov, the minister of economic development for Kaluga oblast, told journalists that the first "focused talk" between regional officials and VW took place only in the beginning of April. By the end of May, VW had already signed an investment agreement with the Russian authorities. Volkswagen has reserved 800 hectares of land in Kaluga oblast: 400 hectares for the factory itself, in which the company will invest 400 million euros, and 400 hectares for its partners in the automobile parts industry. The Kaluga technopark will be the largest project in the history of the post-Soviet automobile manufacturing industry.
Mr. Lyubomiv also announced that yet another technopark, Kaluga-Yug (Kaluga-South), is being built in the vicinity of Kaluga. The Kaluga-Yug park will have an area of 130 hectares. "The Grabtsevo technopark [the VW factory] was built for suppliers whom VW is bringing to the area, and in parallel we are attracting other auto parts manufacturers and automobile assembly plants to our region," said Mr. Lyubimov. He predicts that the technopark will ultimately include no fewer than ten auto parts enterprises with a total investment volume of up to 300 million euros.
The output of the VW factory will be 115,000 cars per year. Production is slated to begin in fall 2007, and the plant is expected to reach optimal output in 2009. The company plans to run a full production cycle: welding, painting, and assembly, as well as a stamp works, which is the most expensive link in the production chain.
Russia already hosts assembly plants belonging to Ford (Leningrad oblast) and Renault (Moscow) with outputs of 72,000 and 60,000 units per year, respectively. In addition, Toyota, Nissan, and General Motors are building plants in St. Petersburg. "The list of general suppliers for international automobile companies is fairly long – Johnson Controls, Bosch, Siemens, and others," explained Detlef Wittig, the chairman of the board of directors at Skoda Auto and a member of the board of directors for Volkswagen. "They are all waiting for large-scale production of automobiles in Russia according to the method of small-junction assembly in order to start their own production here. VW will be able to promise them a sufficient volume of sales in Russia."
In order to attract new investors, the Kaluga authorities are preparing to take further steps to liberalize the legislation governing investment in the region. Alongside perks such as tax breaks on profits and local municipal exemptions on transportation taxes that already exist in the region, the regional authorities intend to introduce new exemptions on property taxes. "Right now the maximum effective period for the exemptions is four years, the same conditions that other regions offer to investors," explained Mr. Lyubimov. "We are planning to introduce an exemption period of 12 years with a sliding scale that will depend on the volume of investment."
Kaluga oblast governor Anatoly Artamonov said that agreements have already been reached with three automobile parts manufacturers to open plants in Kaluga to produce exhaust systems, gearboxes, and steering mechanisms. Tomorrow, Siemens will present a production plan that foresees a volume of investment totaling 30 million euros. The deal with Siemens will make Kaluga oblast the site of the country's largest producer of automobile electronics: Siemens VDO Automotive AG's clients already include Volkswagen, Ford, and Renault.
The regional authorities in Kaluga are keeping the names of other investors quiet, but Kommersant has learned that other projects under discussion for the Kaluga-Yug technopark include the construction of a truck assembly plant with a capacity of 1,000 trucks per year (the investor has not been named) and a venture by the Belgian group Bosel, which specializes in exhaust systems. The value of that venture, like the Siemens proposal, is 30 million euros. The company does not currently supply exhaust systems to Volkswagen's German factories (that supplier is Tenneco), but the company expects its arrival in Russia to attract local assembly plants, including VW, as clients.
In terms of investment volume in automobile production, Kaluga oblast is overtaking St. Petersburg, whose regional authorities like to consider the region a true "Russian Detroit." But so far they have only been able to attract projects on the order of $500 million, while Kaluga already has deals signed for $600 million, even without including the 300 million euros promised for Kaluga-Yug.
Ekaterina Emelyanova
All the Article in Russian as of Oct. 30, 2006
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