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. Last Updated: 07/27/2016

Continental Plans Local Presence

Europe's second-largest tire manufacturer, Continental AG, announced Wednesday that it will close a deal to open a factory in Moscow this year in a project it estimates will need at least 60 million Deutsche marks ($29.7 million) in investment.

"We are in an advanced stage of negotiations with a number of tire plants," said Paul Hendry, Continental's director for Eastern Europe.

The move appears aimed at reversing the post-devaluation decline in Continental's Russian sales, which were down to 100,000 tires last year, a far cry from the firm's peak sales of 500,000 tires in 1997.

By setting up a local production unit, Continental hopes to boost sales to 5 million tires a year, or almost 30 percent of the local market, which boasts sales of 16 million to 18 million tires a year, according to Continental officials.

Preliminary estimates show that Continental would have to invest from 60 million to 100 million marks ($29.7 million to $49.5 million) in order to overhaul production at a Russian tire manufacturer.

The German firm's focus for now is on talks with Moscow Tire Plant, but if these negotiations falter, the company will try to take over another tire producer, he added.

Continental has a 20 percent share of the tire markets in both Europe and the United States, according to company officials. The company is second only to Michelin in Europe.

Continental's planned arrival comes on the heels of a boom in the local tire industry, which has ridden on the coattails of the devaluation-stimulated boom in local auto sales.

The Russian automotive industry grew 14.7 percent in 1999, with production of passenger cars rising 8.1 percent.

Tire production surged 20.6 percent to 17.6 million units, some two thirds of which were passenger car tires.