Daimler has narrowed down potential sites for a Mercedes-Benz car plant in Russia to three locations, according to a Russian media report.
Daimler will likely make a decision next month on whether to build Mercedes cars in the country where its vehicle sales are increasing despite the market's steep downturn, Russia Today said in a report.
The automaker is considering St. Petersburg, Tatarstan's capital, Kazan, or the central Russian region of Sverdlovsk for the factory the report said.
The president of the Russian investment agency Invest in Russia, Yuri Spiridonov, told reporters that Daimler plans to start building a plant at the end of 2015 to reach full capacity by 2017. He said the automaker plans to produce five models, the S class, E class, GL, ML and A class, according to the report.
Daimler said there are "currently no decisions regarding local production of Mercedes-Benz passenger cars in Russia.”
The company, however, is “continuously reviewing local production in the light of market growth and sales potential," a company spokeswoman told Automotive News Europe.
Daimler could use the terms of an existing agreement signed with another automaker such as General Motors to begin output faster, according to the Russia Today report. GM is ending sales of Opel and mainstream Chevrolet cars in Russia because of plunging sales. GM also will idle its plant in St. Petersburg.
Daimler, however, has said it is not interested in signing an agreement on industrial assembly at GM sites in Russia, the report said.
A weak currency, falling oil prices and Western sanctions over Ukraine have hit Russia's economy and consumers are avoiding purchases of big-ticket items such as cars.
While Russian new-car sales have plunged 36 percent in the first quarter, sales of Mercedes vehicles rose 7.3 percent to 12,838, according to data from the Moscow-based Association of European Businesses in Russia. BMW sales fell 14 percent to 8,334. Audi’s volume slumped 26 percent to 6,132 in the same period.
IHS Automotive analyst Tim Urquhart said Mercedes's sales in Russia are being helped by the new C-class sedan, which is popular in Russia, and the GLA compact SUV, which, he said, is the "right product at the right time" for the market. The country's premium market is generally doing much better than the overall market, possibly helped by wealthy Russian investing in hard goods in the current financial meltdown, he said.
It might be sensible for Daimler to establish an alliance with a contract manufacturer first rather than invest in an all-new plant, Urquhart said. BMW has done this, contracting Avtotor to build SUVs and sedans from kits in Kaliningrad, Russia.
"There remain significant macroeconomic and geopolitical risks in terms of investing in Russia at this time," Urquhart said.