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St Petersburg Times

Foreign Car Sales Soar in First Half of '05

By Anna Smolchenko
MOSCOW - Russians bought 225,000 new foreign cars in the first half of this year, compared with 280,000 sold in all of 2004, according to a new report by PricewaterhouseCoopers.

The global consultancy firm said that Russia's automotive production would grow by 45 percent by 2008, making the country the world's fastest-growing car market after China.

Domestic makers are passing on hikes in the price of metals and components to consumers, pricing their models out of the market and watching sales drop 14 percent in the first half of 2005, the report said. At the same time, foreign automotive giants are lining up to open production lines in Russia to meet the surge in demand.

"The automotive industry in Russia is changing before our eyes," Stanley Root, PwC partner and the author of the report, told reporters at a presentation Wednesday.

In a separate report to be released Thursday, Ernst & Young said that Russia ranked third in Europe in terms of foreign direct investment in automobile assembly.

"I wouldn't be surprised if new car imports grew to half a million cars a year within the next two years," said Jean-Francois Tremblay, Ernst & Young's chief automotive analyst for Russia and the CIS.

South Korea's KIA and Hyundai models are already assembled in Russia, and Toyota broke ground on a $140 million plant earlier this month. More Asian carmakers, primarily from Japan and Korea, are considering entering the market in the near future, Tremblay said.

PwC's Root said that Mazda, Nissan or Hyundai might be next to build a Russian plant.

"Some dealers have taken pre-orders up to February of next year," said Andrei Glazkov, Mazda's marketing director for Russia. However, the company has not made public any immediate plans to bring production to Russia.

In the first half of 2005, South Korea's Daewoo emerged as the bestselling foreign make in the first quarter of 2005 with 15,199 models sold, overtaking last year's leader, Hyundai, which had sales of 14,560, according to PwC. The Chevy Niva took third place with 14,036 cars sold; No. 10 Mazda saw sales soar 230 percent to 3,350 vehicles.

According to the PwC report, average car prices by Russia's domestic makers jumped by 11 percent to $6,400 in the first six months of 2005, while the cost of new imports fell by 3 percent to $25,300.
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