LONDON -- Volkswagen will start producing cars in Russia within 18 months.
The German automaker will open a factory assembling complete knockdown kits near Moscow, said VW Chairman Bernd Pischetsrieder.
Despite Russians' preference for sedans, VW will probably produce the Touran medium minivan at the new plant, Pischetsrieder said during a meeting with analysts here.
Sedans can be built cheap by Russia's domestic automakers, said Pischetsrieder. "We want to be seen as having something different and innovative."
VW has considered assembling cars in Russia for years but Pischetsrieder said he wanted to ensure that the project went ahead on the company's terms.
"Other manufacturers have experienced problems in the past and we did not want to be tied down to how much we would be expected to invest or the number of cars we should produce. It is only now that we are close to an agreement that suits everyone."
Pischetsrieder said he is skeptical that a Western automaker can build a cheap car for Russia. Renault, which assembles the Renault Megane at a plant in Moscow, plans to sell its E5,000 Logan sedan in developing markets.
"We already produce a E5,000 car, the Fox in Brazil," Pischetsrieder said, "but to bring it up to European specifications and to meet EU regulations would increase the price to around E8,500."
VW will not reduce capacity in Germany but will double output in Mexico to 500,000 vehicles a year for the domestic market there and for export to the US.
"I do not see the need for [another] plant in North America because we do not have vehicles to compete in volume segments -- such as full-size pick-ups," said Pischetsrieder. "We intend to concentrate on improving quality and we continue to benchmark Toyota."