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Car makers hit the road to Russia

27 Dec 2012 THE AGE - ANDREW KRAMER



SLEEK and glistening, the General Motors sedans creep off the assembly line in Nizhny Novgorod. 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, a country that is becoming a bright spot for GM and much of the rest of the automotive industry.

Trickle-down oil wealth and the spread of easily accessible car financing are lifting sales, which rose by 40 per 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 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 make 30,000 Aveo sedans a year. Cars move along the assembly line and end up in a brilliantly illuminated inspection room, where every inch is carefully examined; the factory is trying to get defects down to GM standards. If all goes well, production will start in January.

The plant is one of a half dozen that GM runs in Russia, where the Detroit car maker intends to invest $US1 billion over the next five years. The money is a good bet, analysts of the Russian market say, for the same reason that politics here recently got a jolt from street protests. The Russian middle class is rising and becoming a force in 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 in the northern summer for a plant in St Petersburg that will make midprice sedans.

Russian car sales are now approaching 3 million vehicles annually, according to the Association of European Businesses, a group that tracks sales here in promoting trade between Russia and the European Union. Russia is projected to surpass Germany, becoming the largest car market in Europe in 2014. In August, Russians bought more cars than Germans did, before sales tapered off in the autumn.

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