A number of foreign companies, including giants such as America's Ford Motor Company, Germany's Volkswagen and Japan's Toyota, have either already opened or are planning to open plants in Russia in the last few years.
And Andrei Reus, who is in charge of the Industry and Energy Ministry while Viktor Khristenko is on vacation, said, "New car assembly facilities are expected to produce more than 600,000 cars a year, rising to 800,000 to 900,000 by 2010, thereby bringing the annual capacity of car assembly plants to 1.9 million cars."
With foreign automakers starting to produce moderately priced vehicles, the Renault Logan for example retails at around a no frills $8,000, ordinary Russians are increasingly taking them out of the showroom in preference to similarly priced domestic models, which are not always seen as being wholly reliable.
Russia's Federal Agency for Industry has forecast car sales in Russia in 2006 at 1.8 million, and Reus said the rising output at the assembly plants would be enough to meet market demand with account for imports.
But the acting minister also highlighted the government's strategy to boost domestic industrial-scale car assembly rather then increasing imports.
"We took the view that our task was to create conditions to prompt market players to choose in favor of investing in domestic production," he said.
"After analyzing the situation, we ... decided to reduce import duties on assembly parts used solely for industrial-scale production," he said.
He said launching a complete production cycle, including welding and painting, at industrial-scale assembly plants would eventually mean localizing 30% of process and would allow the country to make 50% of a car's added value domestically.
He said a total of 1.7 million cars had been sold for $25 billion in Russia in 2005, and the first six months of 2006 saw a 15.6% year-on-year increase in sales and a solid trendline in favor of Russian-assembled foreign models.
"The share of foreign cars assembled in Russia market grew by 3%, whereas share of used cars fell by some 5%-7%," he said, adding that this hopefully signaled an end of the dominance of cheap used foreign cars on the Russian market. Many Russians buy second-hand vehicles - often at outdoor markets - that have been specially brought to the country from the Baltic state or further afield. But many are thought to have been involved in smashes that would have left the original vehicle as a write-off in some countries.
According to the ministry's figures for the first half of the year, Russian cars still lead the market with a 42.9% share (48% a year ago), followed by new foreign cars with 33.8% (26%), Russian-made foreign cars with 12% (9%), and used foreign cars with 11.3% (17%).
