Finnish tyre maker Nokian Renkaat has began building its first plant in Russia and will invest €300 million in the greenfield project amid booming car demand, a Russian official said on Wednesday.


Alexander Butenin, spokesman for the Leningrad region economy and investment committee, told Reuters the plant, being built in the city of Vsevolozhsk near St Petersburg, would start production in the second half of 2005 – it will initially produce 1.5 million tyres a year, gradually rising to four million and possibly to eight million by 2014.


The news agency noted that Russian car production is flat, but imports of foreign cars are steadily rising as consumption is fuelled by the country’s oil and commodities-driven boom while foreign car makers have opened or are considering launching production in Russia.


Nokian reportedly will spend €52 million on the first phase of the plant until the second half of 2005 – the money will come from the European Bank for Reconstruction and Development.


Butenin told Reuters Ford is likely to be the main buyer of tyre production from the first phase for its plant in Vsevolozhsk.


Nokian reportedly decided to give the go-ahead to the plant in northwestern Russia after failing to extend its partnership with Russia’s privately owned Amtel tyre group via a 50/50 joint venture.


The news agency noted that Nokian said in March it would dissolve the venture, which had aimed to make two million tyres this year and five million annually by 2006 – a key plank in the Finnish company’s plan to add volume to the output of its sole plant in Finland.


Nokian has benefited from a focus on winter tyres, which have attracted growing demand in its key Nordic and East European markets and achieved higher prices, which make it one of the most profitable companies in the business, Reuters said.