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Russia's Kaluga poised to be Detroit of Europe

Russian city of Kaluga, just over a hundred kilometers southwest Moscow, is attracting more and more car giants. French carmaker Peugeot Citroen has already chosen the city for its first assembling plant in Russia. While its major partner, Japan's Mitsub

With the limelight currently on St. Petersburg, famous for attracting international automakers, the Kaluga region is rapidly becoming a major carmaking centre in its own right.

Its already home to Volvo Trucks and Volkswagen. Peugot CItron has recently announced it is following suit.  And if Mitsubishi becomes the next to set up shop, the region's output in several years may total half a million cars.

CEO of Volvo Trucks, Staffan Jufors, says his firm's ready to expland in the area.

“The investment we made in the factory in 2003 was very successful for us. Now we are growing out of capacity in that factory and doing this because it's dramatically increased investments that we did,” Jufors said.

Managing director of Volkswagen Russia, Friedrich Lenz, is predicting a rush to Kaluga.

“We are not the first and we are not the last – we are coming at the right time!” Lenz said.

The city is attractive for the auto giants because of its access to railways connecting to Europe.  Other transport links include the motorways leading to Moscow and Kiev.

Just three hours drive from Russia's capital, land is cheap and city officials are working to improve the regions investment climate.

In partnership with foreign investors, they are working on infrastructure.  Building roads and new electricity lines are the priority. The city is emphasizing its commitment to reducing bureaucratic obstacles, and offering as much help as they can.

Transport analyst at A.T. Kearney,  Evgeny Bordanov, says industries connected with the manufacture of cars will the next to set up in Kaluga.

“When they combine their volumes they become very attractive for components suppliers to come and set up their plans there as well. As you know, the cost of producing components is the major item for original equipment manufacturers,” Bordanov said.

With four major plants in St Petersburg, and Kaluga filling up quickly, analysts forecast that by 2010 Russia will become Europe’s largest car assembler, making more than a million international models annually.