Fiat looking for quick decision on Russian plant sites

Italian car maker, Fiat, is looking to make a quick decision on a Russian engine and car production plant site, after signing an agreement with the Economic Development Ministry on June 21 to produce 120 thousand vehicles a year in Russia.

­Dmitry Levchenkov the Head of Economic Development Ministry’s department for special economic zones, told journalists the Italian carmaker is expected to opt for a Greenfield site in either St Petersburg or Nizhniy Novgorod.

“Fiat is intensively examining St. Petersburg along with Nizhniy Novgorod. No decision has been made yet. Most likely the Italian automaker will select a green field site. We expect that they will make a decision on the site in the fall.”  

Alexei Rakhmanov, the Head of the Industry and Trade Ministry’s department of automotive and farm machinery industries added that Fiat should notify contending locations in September.

“My last conversation with Fiat ended with me hearing about eight business plans they are drafting. They are conducting parallel negotiations with a large number of partners, and with regional representatives. We agreed that they will inform us of their decision in September,”

Financing for the project is likely to include Sberbank and a range of international institutions.  Sberbank has proposed that Fiat launch production at the Derways facilities in Karachaevo-Cherkessia after Fiat and GAZ were unable to reach agreement on assembling in Nizhny Novgorod. Fiat is also considering the possibility of maximizing economies of scale and accessing existing component manufacturing clusters near St. Petersburg, where Nissan, Toyota, GM and other carmakers already have assembly operations.

Sergei Udalov, Head of analytical agency Avtostat, believe Fiat will initially find it difficult to compete with existing Russian automakers.

“Fiat is less competitive compare to popular among Russians Toyota, Nissan, Kia. The price of the average Fiat and its model line lags behind other famous brands”

Alexandr Tsipin, MTV presenter and journalist, says that if Fiat establish a good distribution chain and enhance production it could succeed in its niche

“Few Russian drivers opt for Fiat because the service and spare [parts are difficult to find in Russia. However, if Fiat builds an assembly facility and handle the production and create a unique distribution channels with service centers its world popular five door hatchbacks could invade the Russian cities frequently. It is a world famous auto maker with an impressive history and stability.”

According to the AEB Fiat LHV sales in Russia soared 59% year on year in the first 8 months of 2011, with market leaders Lada and Chevrolet posting annualized growth of 25% and 75% respectively.

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