Mercedes waits for Russian sales to hit 100,000 before starting local output

Article by Christian Andrei, on March 12, 2011

Before Mercedes-Benz begins production in Russia, it wants to see a significant increase in its local sales. Rivals BMW AG and Volkswagen AG have already started producing vehicles in the country.

Mercedes sales and marketing boss Joachim Schmidt told Automotive News Europe that it determined that the investment won’t pay off considering the sales volumes. Schmidt said that this year, Mercedes seeks to exceed the 19,724 cars it sold in Russia last year.

However, it added that local production would pay off "as of 100,000 units a year." According to the Association of European Businesses, BMW was Russia's top-selling premium automaker in 2010 with a volume of 20,584. It is followed by Mercedes and Audi with 18,510 units.

Despite Russia's 25% tariff on vehicles that are not built in the country, luxury brands were still able to post solid growth in 2010. BMW has a contract assembly agreement with Kaliningrad-based ZAO Avtotor, which assembled 5,544 BMWs, mainly 3 series, 5 series, X5 and X6 models, last year.

In late 2010, Audi halted the production of models at parent VW's factory in Kaluga, where VW brand and Skoda models are produced. An Audi spokesperson said that there are no plans for further production.

He said that as they expected the statutory parameters to change, the project was restricted to more or less one year from the start. This month, Russia implemented a rule that requires foreign automakers to build at least 300,000 cars a year per production site by 2015, up from only 25,000.

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