Mercedes assembly in Brazil. Will Russia be next?

Mercedes assembly in Brazil. Will Russia be next?

Daimler is thinking about building its first passenger car assembly plant in Russia, a spokeswoman has said.

"We are in talks with the Russian government to verify whether the economicrequirements for local car production are fulfilled," she told the Reuters news agency.

Daimler declined comment on when the talks might yield a decision, the number of cars to be built at the site or the level of investment.

Earlier, German business daily Handelsblatt, citing anonymous sources, said Daimler would spend around EUR200m (US$224m) on a factory to assemble up to 30,000 SUVs from imported KD kits.

German compatriot Volkswagen began Russian production last decade, initially with SKD kit assembly, but moved quickly to 'localise' production, switching to CKD kit assembly with increased local content and then into manufacture of body panels and engines. Such relatively fast development of local manufacture, rather than kit assembly, is encouraged by Russian government auto industry policy.

Mercedes-Benz earlier this year gradually started production at its new, 20,000-unit capacity assembly plant in Iracemápolis, Brazil. First model off the line was the C Class saloon to be followed by the GLA compact crossover in the second half of 2016. Daimler now has 26 plants around the world with most building vehicles which share architecture (eg front-wheel drive, 4x4, saloons, SUVs, crossovers, coupes, convertibles and one-box). 

Reuters noted Russia's volume car market has been in decline for some time due to plunging oil prices, a weak rouble and western sanctions following the Ukraine crisis.

But analysts have said pent-up demand may cause the market to rebound in coming years.