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Sollers revs up car production in Russia’s Far East

The regeneration of Russia's Far East has been at the forefront of Vladimir Putin's visit to the region. On Tuesday he attended the opening of a new carplant by Russian company Sollers.

Budget spending on economic and social development in the Far East was cut by 10% during the financial crisis. The maritime region which is reliant on commodity exports didn’t boast a strong economy before the downturn, and was hit hard. But with Russia now pulling out of recession, Prime Minister Putin says the Far East is a top priority.

“We have prepared a project of utmost importance – the development strategy for the Far East and Baikal region until 2025. It lays out what the region needs in terms of transportation, energy and infrastructure. There is also a proposal to set up special economic zones.”

Development is being pushed across a range of sectors – from delivering crude supplies to Asia and creating joint ventures for shipbuilding, to setting up competitive car production. One of the country's biggest automotive companies, Sollers, in cooperation with Italy's Fiat, Japan's Isuzu and Korea's Ssang Young, has opened the first full-cycle production line in the Far East.

Major global car producers have been increasingly keen of developing facilities in Russia, on the back of a technically skilled but low cost workforce. With St Petersburg having already carved out a niche as the Detroit of the Baltic, the Sollers plant is a big step forward for the Far East and Vladivostok. As part of the Far East development strategy, the factory will attract multimillion dollar investments and create jobs.

Sollers will produce offroaders and commercial trucks as well as cars for social needs like taxis and school buses. With initial capacity of 15 thousand cars a year the company wants to boost production to 40 thousand by 2012. Sebastian Kozitsin, Analyst at BrokerCreditService says competing against Japanese automotive imports will be the first priority.

“The main object of this plan is to take some, I think, little market share in Vladivostok and Primorsky Kray Russian region, because over 80 or 90% of cars in this region are used cars of Japanese production.”

Those cars are seen as an alternative to the often illegal imported second hand autos from neighbouring Japan and Korea which are very popular in the Far East. But whether this project will prove a success largely depends on the price of the new vehicles.

…..And, as a conclusion to that story. Italy's Prime Minister, Silvio Berlusconi, has been invited to purchase the UAZ-Patriot produced at the new Sollers plant.

He'll get a 10% discount on the Limited edition $18 thousand golden metallic car, with alloy wheels and velvet-lined interior.