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Russia the engine for European car industry

27 Dec 2012 SYDNEY MORNING HERALD - ANDREW KRAMER



SLEEK and glistening, the General Motors cars creep off the assembly line in Nizhny Novgorod in Russia. They are as new as cars can get. And so is the assembly line, where the first test cars emerged this month.

Even as GM is scaling back elsewhere in Europe, the company is increasing production in Russia, which is becoming a bright spot for GM and much of the rest of the motor industry.

Trickle-down oil wealth and the spread of easily accessible car financing are lifting sales, which rose 40 er cent in the first half of this year compared with the same period a year ago. GM, Ford, Volkswagen, Nissan and Renault are all opening new plants, or intend to do so soon.

The new GM line in this picturesque town, an old centre of the Russian car industry on the Volga River, will manufacture 30,000 Aveo sedans a year. Cars, held up on jacks, move along the assembly line and end up in a brilliantly illuminated inspection room, where every centimetre is carefully examined; the factory is trying to get defects down to GM standards. If all goes well, production will start next month.

The site is one of half a dozen that GM has in Russia, where it intends to invest $US1 billion ($964 million) over the next five years. The money is a good bet, analysts of the Russian market say, for the same reason that politics recently got a jolt with street protests: the Russian middle class is rising and becoming a force in both commerce and public life.

"I would put Russia in the same breath as China," said Timothy Lee, the head of GM's international division, at a groundbreaking ceremony last northern summer for a factory in St Petersburg, which will make middle-priced cars.

Russian car sales are approaching 3 million cars a year, says the Association of European Businesses, which tracks sales as part of its efforts to promote trade between Russia and the European Union.

Russia is projected to surpass Germany and become the largest car market in Europe in 2014. In August, Russians bought more cars than Germans did, before sales tapered off in the northern autumn.

"It makes sense to invest where you have a good growth," said Vladimir Bespalov, a motoring analyst with VTB bank. "This is the trend, and the growth is in the emerging markets."