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30 Oct, 2010 08:04

New Magna plant to step into Russian car component gap

Magna has opened its fifth plant in Russia. It is ramping up Russian production as more foreign carmakers expand their operations. But local component production is still in low gear.

The new Kaluga region plant will churn out bumpers, dashboards, radiator grills and other components. Parts the Russian auto industry currently lacks.

The Kaluga plant is just one of a series of Russian projects run by Magna. In late September the Canadian company also announced the opening of three plants in St. Petersburg.The total investment into the Kaluga project topped 74 million euro.

The plant will manufacture components for Volkswagen, Skoda, Renault and Peugeout Citroen. Magna vice president for new business development and marketing, Hubert Hodl says the company is using a mix of Russian and imported parts, but that it will shift towards more Russian parts over time.

“For certain products we are using Russian raw material or semi fabricated materials, for some parts we still have to import still, for example, from outside. But I am pretty sure that this will change over time.”

Experts say this year global car production could exceed pre-crisis levels, with 70 million vehicles rolling off the assembly lines. Russia will contribute about 1.7 million to that total by 2011. However many of these are simply assembled here rather than built from scratch.

Stanley Root, Automotive Leader at PricewaterhouseCoopers Russia says the biggest bottleneck for production in Russia is the lack of certain components.

“There is plenty of manufacturing plants, but the source of supply of world class quality components is pretty limited, and a lot of the plants which have been setup are still importing the vast majority of their components. So now the big question, really, is to consolidate the restoration of the Russian car industry.”

The growth potential of the Russian car market is such that experts believe more foreign manufacturers will be looking set up joint ventures with domestic firms.

But as the industry here expands some kinks in the manufacturing process need to be ironed out. Analysts say Russia needs to produce more high quality metal components if it's to fulfill its potential as a base for foreign carmakers.