Bense, von Fritsch, Schaefer, Manturov, Ruess and Vorobyov attend a new Mercedes-Benz plant's cornerstone laying ceremony in the town of Esipovo outside Moscow

Daimler lays foundation stone for $280 million Mercedes-Benz plant in Russia

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Bense, von Fritsch, Schaefer, Manturov, Ruess and Vorobyov attend a new Mercedes-Benz plant's cornerstone laying ceremony in the town of Esipovo outside Moscow
Mercedes-Benz Manufacturing Rus CEO Axel Bense, Germany’s Ambassador to Russia Ruediger von Fritsch, member of the divisional board of Mercedes-Benz Cars Markus Schaefer, Russian Industry and Trade Minister Denis Manturov, head of production planning of Mercedes-Benz Cars Rainer Ruess and Moscow Regional Governor Andrei Vorobyov attend a new Mercedes-Benz plant’s cornerstone laying ceremony in the town of Esipovo outside Moscow, Russia earlier this week. Reuters / Tatyana Makeyeva

By Jack Stubbs, Reuters

Daimler began construction of a new Mercedes-Benz plant near Moscow this week, following through on the first new investment by a major foreign automaker in Russia since Western sanctions were imposed three years ago.

Daimler said in February that it will invest more than $280 million in the factory, contrasting with widespread wariness among international investors after a prolonged downturn brought on by sanctions and a collapse in global oil prices.

But Russia’s economy has recently shown signs of recovery, while its car market is returning to growth after four years of decline. 

The interior of a Mercedes-Benz car is seen at a new Mercedes-Benz plant's cornerstone laying ceremony in the town of Esipovo outside Moscow
The interior of a Mercedes-Benz car is seen at a new Mercedes-Benz plant’s cornerstone laying ceremony. Reuters / Tatyana Makeyeva

Speaking at a ceremony to lay the factory’s first stone, Markus Schaefer, a member of the divisional board of Mercedes-Benz Cars, said Daimler had made the decision after a “very, very successful conversation” with the Russian government.

Moscow Regional Governor Andrey Vorobyov said President Vladimir Putin had personally signed off on the deal, allowing the regional government to offer unspecified conditions previously not available to foreign investors.

“Ultimately, we want to build cars where customers are,” Schaefer said at the construction site in the town of Esipovo, 60 km from Moscow. “We are confident in the long-term potential of Russia.”

Global automakers had viewed Russia as a promising growth market until the 2014 sanctions over Moscow’s actions in Ukraine and the economic downturn prompted companies to put projects on hold.

Ruess, von Fritsch, Manturov, Schaefer, Vorobyov and Bense attend a new Mercedes-Benz plant's cornerstone laying ceremony in the town of Esipovo outside Moscow
Head of production planning of Mercedes-Benz Cars Rainer Ruess, Germany’s Ambassador to Russia Ruediger von Fritsch, Russian Industry and Trade Minister Denis Manturov, member of the divisional board of Mercedes-Benz Cars Markus Schaefer, Moscow Regional Governor Andrei Vorobyov and Mercedes-Benz Manufacturing Rus CEO Axel Bense attend a new Mercedes-Benz plant’s cornerstone laying ceremony. Reuters / Tatyana Makeyeva

Car sales have more than halved from a 2012 peak of almost 3 million a year and US auto giant General Motors quit the market in 2015.

Though Mercedes’ Russian car sales dropped 11 percent last year to 36,888, according to the Association of European Business lobby group, Schaefer said he expects numbers to show an increase in 2017 and continue growing after the new plant opens in 2019. The company’s Russian car sales in May jumped 8 percent year on year.

The factory will employ more than 1,000 people working across a 85-hectare site to produce more than 20,000 Mercedes-Benz cars and SUVs a year.

Hoping to benefit from a future rebound in Russian car sales, some international manufacturers have recently started to strengthen their presence in Russia. Germany’s Volkswagen announced projects last week to boost its VW and Skoda brands as well as commercial vehicles.

(Editing by Tom Pfeiffer and David Goodman)


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