France's Peugeot Chooses Kaluga for New Factory

PARIS -- French carmaker PSA Peugeot Citro--n said Thursday that it had selected Kaluga, 180 kilometers southwest of Moscow, as the site for its Russian plant to spearhead its drive into one of the world's fastest growing car markets.

PSA said it chose Kaluga over Nizhny Novgorod, some 400 kilometers east of Moscow, because of logistics and its proximity to the capital's market. It gave no financial details.

"Volkswagen is also installed in the region and with two big car groups there it will be easier for parts suppliers to set up shop there as well," said a spokesman for Peugeot.

While PSA had been open to a cooperation deal over Russian manufacturing facilities with sport utility vehicle partner Mitsubishi Motors, in the end it decided to go it alone.

From 2010, the new factory will produce vehicles in the midsize segment, which represents nearly 60 percent of all sales in the country's fast expanding market, the company said in a statement.

The plant will have an initial capacity of 100,000 vehicles per year but this can be tripled. The group said it also planned to sell 100,000 Peugeot and Citro--n vehicles in Russia in 2010, with a commitment to eventually raising this number to 300,000 per year.

The signing ceremony for the project is to take place in early 2008.

The size of the plant is comparable to the that of the Trnava plant in Slovakia, PSA's most eastern plant at the moment, apart from a joint venture in China.

That plant took an investment of 350 million euros ($508 million), including costs for a new Peugeot 207 car model.

Renault earlier this month agreed to buy a 25 percent stake in carmaker AvtoVAZ.