The Moscow Times reports that Ford’s plans to dramatically cut the retail price of its cars sold in Russia by making them locally are being upset by currency movements. The newspaper says that the price of components imported from Western Europe for the assembly of vehicles at Ford’s new St. Petersburg plant is rising rapidly due to the dollar’s fall in value against the euro.
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Ford Russia president Henrik Nenzen told the newspaper that “the cost of components is a big risk factor”.
The plant will officially be opened next Tuesday, but pilot production has begun.
Nenzen also confirmed in remarks to the Moscow Times that the plant’s 2002 production target is 2,000 Ford Focuses, with production rising to capacity of 25,000 cars per year after that.
The newspaper also reported that the most affordable Ford model made at the plant is to be sold in Russia for $10,900, while the same model produced in Europe currently sells for some $13,900.
Ford’s major incentive reason for producing cars in Russia is to lower costs through an investment agreement that allows the company to import components duty free, but the savings shrink as the euro rises against the dollar.
Producing cars in Russia also means that Ford will avoid import tariffs on foreign cars, currently set at 25%. However, analysts note that the Russian new car market still suffers from an abundant supply of imported used cars.
Local manufacturers are lobbying for higher import tariffs.
