Fiat delays its $1 billion investment in Russia

Article by Andrew Christian, on October 4, 2012

The overcapacity in Europe has made Fiat consider a delay in constructing a plant in St. Petersburg, the No. 2 biggest city in Russia, according to an official. St. Petersburg's deputy governor Sergey Vyazalov said that Fiat has plans to build an 850 million-euro ($1 billion) facility with annual capacity of 120,000 units in 2013.

However, Fiat has not been in contact with the regional administration for three months and has yet to submit an investment plan. He said Fiat has sufficient capacity in Europe to send cars to the market in Russia. This hints that the project will be delayed for several more years.

Last September 28, CEO Sergio Marchionne told reporters that Fiat is developing a strategy to expand in Russia. He added that the company is discussing the final details with Russian banks. He said that he believes that the Jeep brand’s entry to this booming market is the right choice.

The Moscow-based Association of European Business said that new-car sales in Russia increased by 15% to 1.9 million in the first eight months from the same period the previous year. Fiat brand sales fell by 74% to 5,054 as the Jeep brand tripled its sales to 2,957 units.

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