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. Last Updated: 07/27/2016

Mercedes Mulls St. Pete Plant

bloombergThe first Russian-built models will hopefully roll out in the fall, Schrempp said.
DaimlerChrysler intends to build Mercedes Benz models in St. Petersburg by the end of the year, the Kremlin said late Monday, citing the chairman of the German-U.S. auto giant.

"I am hoping that the first Mercedes will come off the assembly line this fall," J?rgen Schrempp told President Vladimir Putin, according to a transcript on the Kremlin web site.

Schrempp gave no more details, and Putin was quoted as saying that negotiations were in the final stages.

While media have reported that Mercedes was eyeing Russia, analysts expressed surprise at the speed with which Schrempp wants to forge ahead.

As the government opens the home market, foreign carmakers are rushing in. Only last month, Toyota announced the construction of a new plant in St. Petersburg.

The remarks by Schrempp came on the heels of a Daimler advisory board meeting in Moscow last weekend.

A spokesman for Daimler in Stuttgart, Germany, confirmed the company's plans to assemble Mercedes in Russia but declined to provide any details, saying only that St. Petersburg was under consideration.

More information should be available during the city's annual economic forum next month, said a St. Petersburg city official.

Gerhard Hilgert, head of Daimler in Russia, said that Moscow region is also under consideration, and that the firm may enter a partnership with a domestic company to assemble models including the Jeep and Chrysler brands, Interfax reported.

Hilgert also said the company was interested in Russian-made components, the agency reported.

Schrempp's announcement was mostly surprising because of the timeframe he gave.

"I am at a loss," said Vyacheslav Smolyaninov, an automotive analyst with UralSib.

There is no time to build a plant that could produce cars by the fall, he said, adding that in St. Petersburg there are virtually no carmakers with which to enter into a partnership.

Ford opened its own plant in St. Petersburg in 2002.

But Denis Nushtayev, an analyst with Metropol consultancy, said the time frame was achievable if Daimler builds cars from semi-knocked-down kits, which do not require a fully fledged plant.

The company will most likely to start with C-class and E-class models, the two most popular Mercedes models in Russia, Nushtayev said. Of the 4,029 passenger Mercedes cars sold in Russia last year, 1,185 were C-class and 1,262 E-class.

Nushtayev suggested that a blessing from Putin should now give the project additional impetus.

"Our Putin is a big friend of the German people," he said. "I believe the president took [the project] under his personal control."

Mercedes already received a top level endorsement of sorts when the Kremlin acquired a Mercedes Pullman limousine in the 1990s. The presidential garage now boasts more than 100 vehicles.

To entice foreign carmakers into Russia, last month the Cabinet eliminated tariffs on key car components. Daimler, the world's No. 5 automaker, has been looking to start assembling cars in Russia for some time.

Media reported last month that the German-based carmaker was prepared to sink $100 million into a factory near St. Petersburg.

Germany is Russia's largest trading partner and the fourth-largest direct investor into the country.