Renault revs up spending on Moscow plant capacity

French car giant, Renault, has is investing 150 million euro in doubling the capacity of its Moscow plant despite a collapse in Russian car sales over the last year.

The Renault Logan was the best selling foreign car on the Russian market last year. This year the company has doubled the capacity of its Moscow plant hoping the Russian car market will accelerate out of the crisis.

Russians bought 1.4 million new cars last year – down 50% on 2008. But for the coming year, while Europe is expecting a 10% sales drop, industry experts say the Russian market will grow by up to 15%.

Carlos Ghosn, the legendary head of Renault, says Russia has a lot of catching up to do when it comes to car numbers in the population.

“Today you have 230 cars per 1000 inhabitants in Russia, whilst the average in Europe is 600. So somehow Russia is going to come back at least at half the level of European countries, if not at the normal level of European countries. So this means millions more cars sold in Russia. So it’s a question of time before we reach this level.”

Renault holds a 25% stake in domestic car maker Avtovaz, with the deeply indebted Lada maker pinning its hopes on Government subsidies to rev up sales, and give its government supported restructuring programme some breathing space, according to president, Igor Komarov.

“We are seriously relying on the cash-for-clunkers program. The most important for us now is not the quantity results even, but the understanding that this programme is effective and will help automakers.”

Under the program, which is expected to kick off next week, owners of cars older than 10 years can receive bonuses worth about 2 thousand dollars to buy a new Russian-made vehicle.

The Renault-Nissan-Avtovaz alliance – the producer of budget Logan and Lada cars, hopes to take up to 40 % of Russian sales in the next 5 years.

Prime Minister Vladimir Putin has suggested Renault-Nissan produce cars in Russia's Far East. He told the company's CEO that cars built in Russia could replace imports from Japan. And speaking exclusively with Business RT Carlos Ghosn said Renault-Nissan may increase its stake in Avtovaz.

“We came and offered to buy a stake. They said OK, its 25%, and we bought 25%. We think 25% is a very good stake in order to start a very long term collaboration. Now if the Russian government wants us to move higher, we will consider. As an alliance between Lada, Renault and Nissan, we have more than one third of the Russian market. You know I would like to consolidate this, and probably go to 40% as soon as we have the products ready, as soon as we have the technology in Lada, I think, you know getting between 33 and 40% market share – that’s our goal. I hope that its more into the scale of 5 years than 10 years.”