Daimler will invest more than EUR 250 million in the plant with a capacity of 20,000 cars

For the first time after the introduction of the anti-Russian sanctions, a Western company decided on a large-scale industrial project in Russia.
Industry and Trade Ministry said Tuesday that it signed a special investment contract for the construction of the plant in the Moscow Region to produce Mercedes-Benz passenger cars.

The contract is for nine years. By its terms, Daimler will build a full-cycle (welding, painting, assembly) automobile plant in the Yesipovo industrial park; its design capacity will be more than 20 000 vehicles per year. Series production is planned for 2019, investment will amount to at least 15 billion rubles, according to the ministry's information. It is expected to invest more than 250 million euros, according to Daimler. Mercedes-Benz SUVs and sedan E-klasse will be produced there. A source close to one of the parties, adds that the new plant will produce three crossover models and a sedan.

The document was signed between the Russian Federation (represented by the Industry and Trade Ministry), Mercedes-Benz Rus (100% subsidiary of Daimler), the Government of Moscow Region, Peshkovskoe settlement in the Solnechnogorsk district of the Moscow region, as well as the involved parties: Daimler AG, KAMAZ, Daimler Kamaz rus ( DK rus, a parity joint venture, produces trucks in Tatarstan) and the company Mercedes-Benz Manufacturing Rus (80% owned by Daimler, 20% by DK rus, the company was registered in the summer of 2016 . according to SPARK-Interfax).

"Investments of Mercedes-Benz into the creation of a local assembly of cars witness a strategic decision of the global automaker and its faith in the Russian market, regardless of the short-term market conditions," commented the Deputy Minister of Industry and Trade Alexander Morozov. "Thanks to the local production in Russia, we will be even closer to our customers and at the same time strengthen the global competitiveness of the Mercedes-Benz Cars department," says member of the board of Mercedes-Benz Cars Markus Schaefer. Their words are reported by Daimler and the Industry and Trade Ministry.

 In 2016, 36,888 Mercedes-Benz passenger cars were sold in Russia (minus 11%, the entire marke decreased by the same amount, according to the AEB).

Daimler has been choosing the site for its plant for several years, there were negotiations, among others, with Moscow and St. Petersburg.

The choice of the Moscow region (negotiations with the region began in 2015) is due to the proximity to the largest market in Russia, the Moscow region, and the government's willingness to provide investors with the highest possible benefits, says the source of Vedomosti.

General Director of Mercedes-Benz RUS Yang Madeya in August 2016 told Vedomosti that the partner in the construction of the plant for Mercedes-Benz passenger cars will be Kamaz: "We need the partner to have an agreement on industrial assembly, and [Kamaz] has it." This agreement gives benefits to the import of auto components and will nbe valid until 2020. It is expected that DK Rus will produce cars under the contract scheme at the facilities of Mercedes-Benz Manufacturing RUS, says a person close to one of the participants of the investment contract. There will be no additions to the project from Kamaz, according to its representative.

Officials promise to "contribute to the project through the provision of state support measures and favorable tax regime." In particular, the company for the duration of the contract will have the zero rate of the property tax, says a person close to one of the participants of the investment contract. But under the conditions of reception of the zero income tax rate, which may be claimed by the participants of investment contracts, Mercedes-Benz Rus does not fall, because most of the revenue is generated not by production, but by retail sales, said a source. Representatives of Industry and Trade Ministry and Mercedes-Benz RUS did not comment on it.

Daimler's competitors have already began to produce premium cars in Russia, but using the SKD method: VW Audi group assembles at the facilities of its plant in Kaluga, and BMW uses the Autotor's facilities. Local assembly allows you to participate in public procurement; Daimler also wants to use it, said a person close to one of the participants of the investment contract. The presence of the contract will allow the parties to participate in state programs supporting the industry and the market, he adds. There are no conditions on export of the products in the investment contracts, because the project is positioned as import substitution, previously reported by the source of Vedomosti.