Russia: Toyota and VW Starting Production in 2007, Followed by
Nissan and Suzuki in 2009
Combined production capacity of seven Japanese, U.S.,
European and Korean automakers expected to reach 600,000 in 2009

  Some of the world's leading automotive companies that carry out manufacturing operations in Russia as of May 2007 are GM, Ford and Renault, with their combined production capacity of 210,000 a year. The capacity is expected to expand to around 450,000 soon: GM is building a new plant; Renault announced an agreement with Moscow City to expand its existing plant; Ford is considering doubling its production capacity in the future.

  Toyota, Nissan and VW have joined the three automakers and are now building their new plants. Suzuki will soon join the expanded group by announcing its plan to build a plant. Toyota and VW will begin production in 2007, followed by Nissan and Suzuki starting production in 2009, with their combined production capacity of 225,000 a year when their new plants become operational (the number is expected to be 530,000 in the future).

  As of the end of 2009, through these and other expansion plans, seven leading automakers from Japan, the United States, Europe and Korea will be capable of producing around 600,000 a year in Russia. In addition, Fiat and Hyundai are planning to expand their contract production. The nine automotive companies including these two will be capable of producing around one million a year in 2009. According to CSM Worldwide, the eight automotive groups and companies with Suzuki excluded will be producing 1.05m Light Vehicles in Russia in 2012 (the 2006 result is 140,000).

Note: Russian automakers producing on contract: Severstal-Avto Group, producing Fiat brand vehicles, has expanded its capacity to 150,000 a year; TagAZ, which produces only Hyundai brand vehicles as far as contract production goes, is capable of producing 120,000 a year; IzhAvto, which is producing Kia brand vehicles, has increased its capacity for the Korean automaker to 85,000 a year; Avtotor, which is producing GM's Cadillac/Hummer/Chevrolet brands and Kia brand vehicles, is capable of producing 110,000 a year. The combined production capacity of the Russian automakers producing on contract is over 400,000 a year.

■Russia: annual production capacity of leading automakers (as of the end of May 2007)

	Annual production capacity (000)	Description
GM	75→145	Started building its own plant capable of producing 70,000 a year, to be fully operational at the end of 2008
Ford	75	Aiming to double the current capacity to 150,000 a year in the future
Renault	60→160	Expanding the production facilities to be able to produce 160,000 a year in 2009
Toyota	0→50	Building a plant capable of producing 50,000 a year, to be operational at the end of 2007
Nissan	0→50	Building a plant capable of producing 50,000 a year, to be operational at the end of 2009
Suzuki	0→10	Announced a plan to build a plant which will begin production in 2009. The automaker plans to manufacture 30,000 in the future.
VW	0→115	Building a plant capable of producing 115,000 a year, to be fully operational in the first half of 2009
Fiat	Production on contract	Tied up with Severstal-Avto. The automaker plans to produce 175,000 in the future.
Hyundai	Production on contract	Hyundai tied up with TagAZ to produce 75,000 in 2007. Kia tied up with IzhAvto to produce 80,000 in 2008.
Total	210→605	The combined production capacity as of the end of 2009 is around one million a year including the production on contract

(Notes) 1:	GM's current production capacity of 75,000 a year is that of GM-AvtoVAZ and does not include the capacity for SKD vehicles, an operation which was started before the completion of its own plant. The American automaker's vehicles are also produced by Avtotor in Kaliningrad.
2:	Toyota's goal is to bring up its capacity to 200,000 a year in the future.
3:	Suzuki aims to produce 30,000 a year in 2014.
4:	Kia also has Avtotor in Kaliningrad producing its vehicles on contract.
5:	Avtotor in Kaliningrad produces a small number of BMW cars as well.
6:	Mitsubishi Motors, Hyundai and PSA are said to be going into manufacturing operations as well. Mitsubishi Motors and PSA, it is speculated, are discussing the possibility of jointly building a plant.

■Light Vehicle production will reach 2.36m in 2012, with 1.05m made by automakers from Japan, the United States, Europe and Korea

  CSM Worldwide forecasts that Russian Light Vehicle production will expand beyond the two million mark in 2010 to reach 2.357m in 2012 (the 2006 result is 1.392m).

  Local Russian automakers, however, will be producing only a total of 1.08m in 2012, no higher than the 2006 level, with AvtoVAZ and GAZ producing 890,000 and 190,000 each, according to the forecast.

  Most of the expansion will come from Japanese, American, European and Korean automakers whose combined production will reach 1.05m in 2012 (an increase of 910,000 on 2006): GM-180,000, Ford-100,000, Renault-180,000, VW-190,000, Toyota-180,000, Nissan-40,000, Fiat-100,000 (contract production, including the Ducato jointly developed with PSA), and Hyundai/Kia-80,000 (contract production).

Note: Ukrainian Light Vehicle production (CSM Worldwide's forecast) is shown at the end of the report for reference.

■Renault: in 2009, increasing the Logan's production capacity to 160,000 a year and the local content to over 50%

  Renault intends to increase the Logan's production capacity at its Russian subsidiary, Avtoframos, to 160,000 a year in 2009 (the current production is 60,000), and to add a new version (most likely station wagon) to the model. At the same time, the local content will be increased to over 50% by 2009 as the Moscow City government develops the suppliers' zone to respond to an increasing production.

■Renault's Russian production base

JSC Avtoframos	Avtoframos is owned by Renault and the Moscow City government with a 93.41% stake and 6.59% stake respectively. It produces the Renault Logan at its plant in Moscow, whose production capacity is currently set at 60,000 a year and to be expanded to 80,000 a year in the middle of 2007.
	The French automaker and Moscow City government reached a framework agreement in May 2007 to expand the subsidiary's production capacity by 100,000 to 160,000 a year within the 18 months. A new version of the Logan will be produced within the two years.
	Renault and Moscow City government announced in February 2007 that they had come to a basic agreement on the expansion of the automaker's plant, which requires the city to provide land and the automaker to additionally invest $150m to expand the building and equipment.

■Ford: aiming to double the annual production capacity to 150,000 and starting to produce the Land Rover Freelander in 2007

  Ford increased its annual production capacity by 15,000 to 75,000 in 2007, which it aims to double (at some unspecified timing). The number of production models will also expand, with the Land Rover Freelander joining the lineup in 2007.

■Ford's Russian production base

ZAO Ford Motor Company	The Russian company is owned by Ford and Bankirsky Dom with a 99% stake and 1% stake respectively. Its plant at Vsevolozhsk outside St.Petersburg is capable of producing 75,000 a year (increased from 60,000 in 2006), which the American automaker intends to double.
	The plant produces the Ford Focus (developed by Ford Europe), which will be joined by the Land Rover Freelander within 2007.

■GM: building a new plant capable of producing 70,000 a year and increasing the production of GM-Daewoo models

  In June 2006, GM began building a plant capable of producing 70,000 a year outside St. Petersburg. The plant will produce SUV and compact car models from the end of 2008, many of which have been developed by GM-Daewoo.

  Furthermore, the American automaker produces SUVs and passenger cars in a joint venture with AvtoVAZ and has an arrangement with Avtotor in Kaliningrad to have the Cadillac/Hummer/ Chevrolet vehicles produced there on contract.

■GM's Russian production base

OOO General Motors Avto	The Russian company is GM's wholly owned subsidiary which, with production capacity of 4,000 a year, began the SKD assembly of the Chevrolet Captiva at its plant in St. Petersburg in September 2006. The plant also functions as headquarters as well as training and recruiting centers but its manufacturing function is a temporary one until the new plant now under construction comes on stream.
	In June 2006, the American automaker began building a new plant capable of producing 70,000 a year in Shushary outside St.Petersburg. It will start producing the Captiva at the end of 2008, which will be joined by a new compact model later.
	A total of $300m will be invested in the new plant (the initial plan called for an investment of $150m and production capacity of 25,000 a year but changes have since been made, which was announced in March 2007).
ZAO GM-AvtoVAZ	The Russian company was established in 2001 and is owned by GM, AvtoVAZ and European Bank for Reconstruction & Development (EBRD), with a 41.61% stake, 41.61% stake and 16.78% stake respectively. Its plant at Togliatti is capable of producing 75,000 a year and produces the Chevrolet Niva (based on the Lada Niva) and the Chevrolet Viva (based on the Opel Astra T3000).
	GM and AvtoVAZ are in agreement to add the Opel Corsa to the lineup, whose production will be around 20,000 a year: it is said that both automakers were in negotiations for some time to get a third model in production due to the poor sales of the Viva.
(Production on contract) ZAO Avtotor	The Russian company, based in Kaliningrad, is a local company without any foreign participation and produces vehicles for foreign automakers on contract. It tied up with GM in 2004 and produces the American automaker's Cadillac CTS, the Hummer H2, and Chevrolet brand's vehicles which are the Tahoe, the TrailBlazer, the Aveo (the Kalos in Korea), the Lacetti, the Gentra, the Tacuma (the Rezzo in Korea), and the Epica (the Tosca in Korea). It is capable of producing 110,000 a year.
	The Russian company assembles all the GM models in SKD form but will begin the CKD production of the Lacetti's hatchbacks and sedans in the first quarter of 2008 (the operation, which was agreed to between the American automaker and the Russian one in December 2006, includes body welding and assembly, painting and final assembly). 15,000 units of the Lacetti will be produced in a year.
	The Russian company is also in a tie-up with Kia and produces the Sportage, the Carnival, the Magentis, the Opirus, and the Cee'd in SKD form. The Cee'd's production began in May 2007 with components from the Korean automaker's Slovak plant. The production plan for the model is 18,000 in 2007 and 25,000 in 2008.
	The Russian company also assembles the BMW 5-Series and 3-Series models, China's Chery Automobile's Chery Amulet and the Tiggo NCV in SKD form.

Sources: GM Russia News Release 2007.03.29/2006.10.25, etc.

■Toyota and VW will start production at their new plants in 2007, Nissan and Suzuki in 2009

■Toyota: building a plant capable of producing 50,000 a year outside St. Petersburg, where production of the Camry will start at the end of 2007.

  Toyota is building a plant in Shushary outside St. Petersburg, which is capable of producing 50,000 (going up to 200,000 as a goal) a year and will be operational at the end of 2007. The Camry is the first production model, which will then be followed by a strategic model in 2010, now under development for emerging markets.

■Toyota's Russian production base (planned)

Toyota Motor Manufacturing Russia L.L.C. (TMMR)	The Russian company is owned by Toyota and EBRD, with an 80% stake and 20% stake respectively. It is building a plant in Shushary outside St. Petersburg, which will be operational in December 2007 (with an investment of $150m). The initial production capacity is 50,000 a year, with 200,000 targeted for the future.
	The first model the plant gets is the Camry, 16,000 of which will be produced in 2008. An additional investment of between $30m and $40m will be made to enable the Russian company to manufacture body parts to reduce the production cost (representing a potential 10-15% cost reduction).
	Toyota is developing a low-priced strategic model for emerging markets including Russia and plans to put it on the market in 2009. It has one-liter class engine and is to be priced lower than the Japanese automaker's current lowest-price car, the Passo (the base model is priced at 900,000 yen level including taxes). Local press reported that it will make its appearance in Russia in 2010.

■Nissan: operating a new plant located outside St. Petersburg and capable of producing 50,000 a year at the end of 2009. Began marketing Infiniti vehicles.

  Nissan is building a plant capable of producing 50,000 a year in Shushary outside St. Petersburg. It is to be operational at the end of 2009.

  The automaker started selling Infiniti brand vehicles at three shops in Moscow and St. Petersburg in autumn 2006. They are the FX, which is crossover SUV, and the M (the Fuga in Japan), which is sedan, and will be joined later by the G35 (the Skyline in Japan) and the QX56, which is SUV.

■Nissan's Russian production base (planned)

Nissan Manufacturing Rus L.L.C.	The Russian company, wholly owned by Nissan, is building a plant capable of producing 50,000 a year in Shushary outside St. Petersburg, which will be operational at the end of 2009. An investment of $200m has been made.
	Starting with only one model, the plant will expand the lineup over time and produce at least three models in CKD form. All the components will be imported from Japan for the time being.
	The automaker's manufacturing and investment plan was approved by the Ministry of Economic Development and Trade of the Russian Federation in June 2006.

■Suzuki: building a plant outside St. Petersburg in a joint venture with ITOCHU and starting to produce in 2009

  Suzuki will build a plant in Shushary outside St. Petersburg in a joint venture with ITOCHU. It will start producing the Grand Vitara and the SX4 in 2009, whose volume is expected to go up to 30,000 in 2014.

■Suzuki's Russian production base (planned)

(Named tentatively) Suzuki Auto Mfg Rus L.L.C.	Suzuki will build an automotive plant on a site of 243,000㎡ in Shushary outside St. Petersburg in a fifty-fifty joint venture with ITOCHU, with an investment of 14 billion Yen. The production will start in 2009.
	The plant will begin to produce the Grand Vitara and the SX4 in summer 2009 and produce 5,000 units of them in its first year, on its way to reach a goal of 30,000 (said to be a target for 2014). The local content will start at roughly 10%, going up to about 30% in 2014.
	The automaker sold 16,000 units, many of them the Grand Vitara, in Russia in fiscal 2006. Apparently it first negotiated with Nissan to have its vehicles built at the latter's plant in Shushary.
	An agreement to build an automotive plant in Russian was signed by the automaker and the Ministry of Economic Development and Trade of the Russian Federation in June 2007.

Sources: Suzuki News Release 2007.6.8, etc.

■Mitsubishi Motors: considering producing the Lancer in Russia

  Mitsubishi Motors has transferred responsibility for the Russian market from its European regional headquarters to the headquarters in Japan to step up its presence there and is said to be looking at producing the Lancer in Russia.

■Mitsubishi Motors is considering local production in Russia

Mitsubishi Motors has been considering local production and has apparently started talks with the Russian government. If they are successful, it will produce the Lancer.

The automaker sold 46,969 units of the Lancer, the third-best seller of foreign makes, in Russia in 2006 (The Ford Focus is first with 73,468 and the Renault Logan second with 49,323). The new Lancer was released in Russia in May 2007 (ahead of the rest of Europe which will get the model in autumn 2007).

In fiscal 2007, the automaker transferred responsibility for the Russian market from its European regional headquarters to the headquarters in Japan and intends to step up its operation there. It plans to sell 94,000 in Russia in fiscal 2007 (the result for fiscal 2006 was 70,000).

■VW: building a plant capable of producing 115,000 a year outside Moscow, that will include Skoda brand cars

  VW is building a plant capable of producing 115,000 a year in Kaluga outside Moscow (an expansion to 250,000 planned). The plant will begin producing in SKD form in autumn 2007 and will be fully operational in the first half of 2009. The vehicles to be produced will include Skoda and VW brands models and, most likely, a low-priced new model for the Russian market.

■VW's Russian production base (planned)

OOO Volkswagen Rus	The Russian company is owned by VW Group and EBRD with an 80% stake and 20% stake respectively. It is building a new plant 160km southwest of Moscow in Kaluga City with a total investment of 400 million Euro(roughly $510m). The plant will be fully operational in the first half of 2009 and capable of producing 115,000 a year, increasing to 250,000 in the future.
	The final assembly shop will be completed first at the new plant to enable it to produce the Skoda Octavia and VW brand vehicles in SKD form in autumn 2007. The yearly volume is 20,000. VW brand models will include the Polo, the Passat, and the Touareg. Skoda brand's Fabia and Superb will be joining the lineup later.
	The German automaker intends to develop a low-priced model for production at the Russian plant, which will be either based on the next generation Polo or the next generation Gol itself.

■Fiat and Hyundai Group will expand their contract production

■Fiat: tied up with Severstal-Avto to produce the Albea, the Doblo, the Linea, and the Ducato on contract

  Fiat tied up with Severstal-Avto, an automotive arm of Severstal, a Russian steelmaker, and began producing the Fiat Albea at ZMA, one of the group companies of Severstal-Avto, at the end of 2006. The Fiat Doblo was added as a production model in April 2007, which will be joined by the Fiat Linea in 2008. The Italian automaker plans to produce 40,000 in 2008, expanding to 100,000 some time in the future in its rough plan.

  Fiat is also working with Severstal-Avto to produce small commercial vehicles in a tie-up, which will allow the Italian automaker to produce the Fiat Ducato at Severstal-Avto-Elabuga (capable of producing 75,000 a year), an assembly plant newly established by the Russian company, at the end of 2007, and to export over half the production volume.

■Fiat's Russian production base (on contract)

OAO ZMA (JSC Small Car Plant)	The Russian company is 99.6% owned by Severstal-Avto (SSA). Its plant in Naberezhnye Chelny (in the Republic of Tatarstan) is capable of producing 75,000 a year and began to produce on contract the Fiat Albea (sedan based on the Palio) in December 2006 and the Doblo Panorama, which is MPV, in April 2007.
	The Fiat Linea, which is a sedan model, will be added to the production in 2008. The Albea, the Doblo and the Linea are all produced at Fiat's Turkish production base, Tofas, which will supply their components to the Russian company. The Russian employees have been trained at the Turkish plant.
	The Russian company plans to produce 20,000 Fiat brand vehicles in 2007, 30,000 in 2008, and over 100,000 in the future in its rough plan.
OAO Severstal-Avto-Elabuga	The Russian company was established in 2006 and is wholly owned by SSA. It will produce the Fiat Ducato, which is a van model, at a new plant in Elabuga in the Republic of Tatarstan from the end of 2007. The plant is capable of producing 75,000 a year. More than half the production of the Ducato will be exported.

(Notes) 1:	SSA also has a tie-up with Korea's SsangYong whose Rexton and Kyron are produced at ZMA.
2:	SSA, in addition, is working with Isuzu in a tie-up, in which one of the group companies, OAO Ulyanovsky Avtomobilny Zavod, began producing the NQR (the Elf in Japan), which is a small truck, in SKD form in July 2006 (the initial production volume is 10,000, increasing to 30,000 in the future).
3:	Isuzu has been producing since 1999 the Elf and a small bus based on the Elf platform at Ukraine's Bogdan Corporation as well, and aims to expand the production to 20,000 (including exports) a year in the future. The Japanese automaker's small bus based on the Elf platform went into production in January 2007 also at Uzbekistan's Samarkand Automobile Factory LLC, with the production targeted at 3,000 a year (including exports) in the future plan.

■Hyundai Group: rapidly expanding the contract production of Hyundai/Kia brand vehicles

  Hyundai Group is rapidly expanding contract production in Russia. The Korean automaker began producing the Santa Fe Classic, the fourth production model, at its Russian partner, TagAZ, in April 2007 (the Russian company produces only Hyundai vehicles).

  In addition to the Spectra, Kia began producing the Rio at the end of 2006 and the Sorento in March 2007 at its Russian partner, IzhAvto. The Russian company is expanding the production equipment for Kia to bring up the Korean automaker's production from around 25,000 in 2006 to an 80,000 level in 2008.

  Kia has also partnered with Avtotor in Kaliningrad and began producing the Cee'd, the fifth model to be produced there, in 2007 (with components coming from its Slovak plant).

■Hyundai Group's Russian production base (on contract)

OOO TagAZ (Taganrog Automobile Plant)	The Russian company is 100% locally owned (one of the Doninvest Group companies). The plant in Taganrog is capable of producing 120,000 a year. It has been producing on contract the Accent since May 2001, the Sonata since April 2004, and the Porter, a small truck, since May 2005, for Hyundai brand vehicles. The 2007 production plan for the three models is 70,000.
	The Russian company began producing the Santa Fe Classic, Hyundai brand's fourth model, in April 2007. The 2007 production plan for the model is 5,000.
OJSC IzhAvto (Izhevsk Automobile Factory)	The Russian company is 100% locally owned (and belongs to SOK Group, which consists of AvtoVAZ's suppliers and a network of spare parts dealers for AvtoVAZ). The plant in Izhevsk, Udmurt Republic is capable of producing 50,000 a year (it was built with a design to produce 220,000 a year).
	The Russian company tied up with Kia in 2003 and began producing in SKD form the Spectra in March 2004 and the Rio (the Pride in Korea) at the end of 2006 for the Korean automaker on contract (the Spectra moved to CKD form in August 2005). It also produces the VAZ 21043 Stationwagon, Izh 27175 Pickup and others.
	The Russian company also began producing the Kia Sorento, which is SUV, in SKD form in March 2007. The model's 2007 production plan is 8,100. The Russian company has been expanding the production equipment since April 2007 to respond to the Korean automaker's increased production and will move to the CKD production of the Sorento and the Rio in summer 2008 (the Korean automaker intended to move the Sportage, which is a small SUV model being produced at Avtotor, to IzhAvto but has since changed its mind and produces instead a larger SUV, which is the Sorento, at the latter).
	The total production capacity of IzhAvto, through the expanded production equipment at its Izhevsk plant, will increase to 110,000 (80,000 of them Kia vehicles) in 2008 and 140,000 (85,000 of them Kia vehicles) in 2009.

(Supplement) Ukraine's Light Vehicle production (CSM Worldwide forecast)

(units)

Design Parent	Manufacturer	Brand	2006	2007	2008	2009	2010	2011	2012
AvtoVAZ	AvtoZAZ	Lada	28,078	35,871	38,692	43,646	32,466	31,274	28,912
	AvtoGAZ (note)	Lada	17,373	16,572	18,377	18,563	17,028	15,901	14,681
	LuAZ	Lada	30,665	31,536	25,442	31,627	20,097	21,588	21,025
	Total		76,116	83,979	82,511	93,836	69,591	68,763	64,618
AvtoZAZ	AvtoZAZ	ZAZ	31,214	23,362	18,455
Chery	AvtoZAZ	Chery	457	8,949	10,613	10,297	10,135	9,623	8,894
DaimlerChrysler	AvtoZAZ	Chrysler	8	15	157	148	343	336	324
Fiat	AvtoZAZ	Opel		195	401	491	603	588	520
Geely	AvtoGAZ (note)	Geely		3,317	14,886	15,611	16,994	17,355	17,764
GM	AvtoZAZ	Chevrolet	68,065	80,326	88,193	122,221	131,889	127,401	122,491
		Daewoo	50,522	67,180	30,552
		Opel	9,913	12,396	12,711	13,421	10,709	10,897	11,063
		ZAZ	3,551	1,275	1,338	1,713	6,654	5,946	5,442
	Total		132,051	161,177	132,794	137,355	149,252	144,244	138,996
Hyundai	LuAZ	Hyundai	4,284	5,728	6,840	9,260	11,245	10,600	10,511
		Kia	5,219	9,785	13,080	15,704	8,316	8,582	8,627
	Total		9,503	15,513	19,920	24,964	19,561	19,182	19,138
SAIC	AvtoGAZ (note)	Ssangyong	370	1,108	1,351	1,386	1,723	1,912	2,439
VW	Eurocar	SEAT	313	2,161	2,814	2,959	2,491	2,401	1,787
		Skoda	19,090	25,187	28,070	29,484	26,251	19,486	19,746
		VW	2,135	12,088	18,456	24,277	25,746	24,384	23,265
	Total		21,538	39,436	49,340	56,720	54,488	46,271	44,798
Total			271,257	337,051	330,428	340,808	322,690	308,274	297,491

Source: CSM Worldwide "Light Vehicle Forecast (April, 2007)"
(Notes) 1:	AvtoGAZ in "Manufacturer" column is KremenchugAvtoGAZ.
2:	For a recent trend in Ukraine, please see our Report No. 466 of May 2006 "Russia: VW and Nissan Building Factories, Hyundai Expanding Contract Production."
3:	All right reserved. No part of the tables may be reproduced or copied without explicit agreement of CSM Worldwide.

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