A brand new factory at Yelabuga in Russia which will assemble the Fiat Ducato van is set to be completed by early next summer, the Head of the Russian Federal Agency for Special Economic Zones, Yury Zhdanov, said this morning. The new project is a joint venture between Fiat Auto and Russian carmaker Severstal Auto, which will build on the recent swage of deals that will see the Fiat Palio, Albea, and Doblò models all being assembled from CKD kits at a plant in Naberezhnye Chelny, which like Yelabuga is located in the Russian Volga republic of Tatarstan, from next year.

The deal between Fiat Auto and Severstal Auto to assemble the outgoing Fiat Ducato van range (X 2/44) in Russia was reached late last month with production set to be launched towards the end of 2007 at a facility at Yelabuga, an area around 500 miles south-west of Moscow. Annual capacity is slated at 75,000 units with a significant number of these being destined for export, mainly to the Eastern European and Caucus nations.

Yelabunga is located in one of Russia's "Special Economic Zones". It is a zone that will allow Fiat and Severstal to receive significant tax breaks and other benefits, in return for bringing much needed new investment and jobs to an economically struggling region. Initial local component content levels have been pegged at 30 percent, however though within 8 years, this content has to be raised to 50 percent. "The new plant could be constructed within nine months and it will not be a semi-knock down assembly because the localization of production will stand at over 50 percent," said Yury Zhdanov, the Head of the Federal Agency for Special Economic Zones at a press conference this morning.
 

Under the wide-ranging deal with Fiat Auto, Severstal Auto will also begin to import and sell Fiat Auto models in Russia, with the new Fiat Grande Punto set to form an initial focus of the import operation. Severstal Auto have already begun setting up a Russia-wide dealership and distribution network which is expected to eventually include the Alfa Romeo and Lancia brand's ranges. Severstal Auto hope to cash in on the recent boom for foreign-built vehicles: in the first six months of 2006 almost 400,000 cars were imported, compared to 575,000 in the whole of 2005. Sales climbed in the first half of this year across virtually all the market segments while Mercedes, BMW, Citroën, Ford, Skoda and Mazda have all reported close to doubling their sales year-on-year.

Meanwhile, the parent company of Severstal Auto, the giant Russian steel maker Severstal, is set to launch a stockmarket IPO later this year as it changes direction following its recently collapsed high-profile merger talks with fellow steelmaker Arcelor. Severstal Group is believed to be busy preparing to float stock on the London Stock Exchange, offering around 25-30 percent for US$1.5-3 billion. Severstal has reportedly already reached agreement with Deutsche Bank, UBS and Citibank to handle a London floatation.