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Renault Ramps Up Russian Investments

French car maker has invested $204 million to double capacity at its Moscow plant to take advantage of Russia's cash-for-clunkers program.

MOSCOW (AP) -- Renault SA is ready to take advantage of Russia's cash-for-clunkers program, which starts next week, after ramping up its investment in the country by doubling capacity at its Moscow plant.

The French car maker has invested euro150 million ($204 million) to bring the plant's capacity up to 160,000 cars per year, company president Carlos Ghosn said Monday, as the first Moscow-made Sandero hatchbacks were offered for sale.

"It shows Renault's confidence in the development of the Russian car market, and in the potential of this market and our aim to be among the leaders of this market," Ghosn said.

The Sandero joins the Logan model, which has been produced at the Moscow plant since 2005 and was the best-selling foreign car in Russia last year. Renault plans to introduce a third model, the Duster SUV, in late 2011.

Renault faces tough competition in Russia. Logan overtook the Ford Focus in last year's sales by just 1,761 units. Ford is among the other global car makers that have started production in Russia in the past few years in an effort to cash in on the booming market. There are currently as few as 230 cars for every 1,000 people in Russia, compared to around 600 in Western Europe, according to Ghosn.

Russia had been on track to become Europe's largest car market in 2008, but sales halved last year as the country was battered by the global economic downturn. Car sales are now back to 2005 levels, and industry analysts say they are likely to improve only slightly or remain flat in 2010.

"We think the Russian market has bottomed out," Ghosn told journalists. "From now on we should see a recovery."

In an effort to spur sales, the Russian government on March 8 is starting a highly anticipated scrappage scheme similar to the cash-for-clunkers programs that boosted sales across Europe and the United States in 2009. Drivers who turn in a vehicle that is at least 10 years old will receive a certificate for 50,000 rubles (about $1,670 or euro1,225) to put toward the purchase of a new car built in Russia.

The incentive represents about one-sixth of the price of a Logan or Sandero.

Ghosn met later Monday with Prime Minister Vladimir Putin, who has pushed Renault to strengthen its commitment to AvtoVAZ, Russia's largest car maker. Renault holds a 25 percent stake in the struggling company, which has received numerous state bailouts.

Renault has pledged euro240 million ($362 million) in technology transfers, production machinery and technological expertise to AvtoVAZ, but has stopped short of financial aid. Renault's president on Monday reiterated the company's support for AvtoVAZ, but insisted that it was up to the Russian management to turn around the plant.

Putin invited Renault to set up production of Nissan cars in Russia's Far East, where thousands of used Japanese cars were imported annually before the government drastically raised import duties last year, Russian news agencies reported.

The French and the Japanese car makers are linked through cross-shareholding: Renault has a 44.4 percent stake in Nissan Motor Co., which in turn owns 15 percent of Renault.

Putin also said Russia was going to sponsor Renault F1, the Formula-1 racing team of Russia's first F1 driver, Vitaly Petrov. He did not disclose the terms of the contract.

The announcement of Renault's increased investment in Russia came the same day President Dmitry Medvedev began a state visit to France.

Other foreign car makers also are raising their production on the Russian market.

In February, Italy's Fiat SpA announced a euro2.4 billion ($3.3 billion) joint venture with Russian automobile company Sollers to produce up to 500,000 vehicles per year by 2016 at a plant in the Tatarstan region.

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