Peugeot, Mitsubishi unveil Russian car plant

French automaker PSA Peugeot-Citroen and Mitsubishi Motors of Japan on Friday opened a plant in Russia as the companies hope to cash in on a recovery in the car market.

The French and Japanese carmakers, which have created a joint venture in Russia, unveiled a 470 million euro (620 million dollar) plant in the town of Kaluga near Moscow that will assemble mid-range vehicles to meet a growing demand for foreign brands.

For now, the plant is expected to assemble vehicles from parts manufactured in France but from 2012 it will switch to locally produced parts to make 125,000 units a year. Initial production will be 25,000 units.

“This factory is a major trump card for us. This will allow us to accelerate our development in Russia,” PSA Peugeot Citroen chief executive Philippe Varin said at the ceremony in the city of Kaluga, southwest of Moscow.

“We have confidence in the potential of growth in the Russian auto market and we are preparing for its recovery. Our priorities are Asia and Russia, which are markets with very strong growth.”

The economic slowdown triggered an unprecedented crisis in Russia’s once booming auto industry as consumers tightened their belts but demand is slowly picking up as the country emerges from the economic crisis.

Car sales in 2009 plunged by 56 percent on last year to 1.4 million vehicles and growth is expected to be modest this year, according to consultancy PricewaterhouseCoopers.

The Moscow-based Association of European Business expects 1.45 million cars to be sold in the country this year.

Georgy Poltavchenko, Kremlin envoy to the Central Federal District, said the opening of the plant was a vote of confidence in Russia’s car market.

“That two leading global car makers are investing in Russia despite a difficult situation speaks for the fact that global capital has confidence in Russia,” Poltavchenko said at the ceremony.

The Kaluga plant will be managed by Peugeot, which controls 70 percent of the venture, compared with Mitsubishi’s 30 percent, and produce mid-range sport utility vehicles and cars, including Peugeot 308 and Citroen C4.

Major auto giants, including General Motors, Ford and Toyota, operate plants in Russia where they assemble cars from locally-made components.