Chinese carmakers set to enter Russian market

Although the Russian government refuses to sign easy-term industrial assembly contracts with Chinese carmakers, they are expanding local production despite restrictive car-body import duties.

China's Great Wall Motor Corporation and its Russian distributor, Irito Group, have signed a contract for the delivery of car production equipment worth $25 million. A source close to the company said additional investment was needed to launch production.

The partners, due to build a production line in Gzhel near Moscow, said the automotive plant's first stage would annually manufacture 5,000 vehicles and would expand production in line with market demand.

A local Chinese-car dealer said the plant could annually turn out at least 50,000 vehicles, and that the first cars would be assembled already next summer.

Great Wall was forced to mothball its car assembly project in Gzhel this fall after the government started charging restrictive 5,000-euro-plus car-body import duties, Irito spokesman Andrei Matveyev told the paper.

Although Russian officials have never openly opposed Chinese economic expansion, they did not permit Chinese carmakers to import auto components under easy-term industrial assembly contracts.

Great Wall was also denied resident status in the Alabuga special economic zone in Tatarstan, an autonomous republic in Russia's Volga Federal District.

This spring, Chery Automobile, another major Chinese carmaker, stopped production at the Avtotor automotive plant in Kaliningrad, Russia's Baltic exclave.

High car-body import duties aim to relocate production to Russia and to prevent semi-legal imports, while the country of origin is irrelevant, an Industry and Trade Ministry spokesman told the paper.

In January-October 2008, 33,338 Chinese vehicles were sold in Russia, accounting for 1.9% of foreign car sales.