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. Last Updated: 07/27/2016

Suzuki Will Build $115M St. Pete Plant

bloombergOsamu Suzuki, left, posing with a SX4 in Tokyo last year. The model is one of two that will be built in St. Petersburg.
ST. PETERSBURG -- Suzuki Motor Corporation signed an agreement Friday to build a $115 million plant in St. Petersburg that will produce its popular Grand Vitara and SX4 models.

The deal, signed by Suzuki chairman Osamu Suzuki and St. Petersburg Governor Valentina Matviyenko, reconfirms the city's status as the country's automotive hub.

The Japanese carmaker and the Itochu Corporation will jointly invest 14 billion Japanese yen ($115 million) to produce the Grand Vitara, a sports utility vehicle and Suzuki's bestseller in Russia, and the SX4, a crossover.

Employing 500 people, the plant will start production in late 2009 and will have an output of 30,000 cars per year.

"We think there is a big potential," Suzuki told reporters after a signing ceremony in the Smolny Palace attended by Japanese and Russian officials, including Economic Development and Trade Minister German Gref and Takanobu Furuta, managing director of Itochu.

The company had planned to sell 20,000 to 21,000 cars in Russia this year, but it has exceeded this target in the first five months, Suzuki said, adding that he hoped the country would continue to post strong economic growth. Last year, Suzuki sold 16,118 vehicles, including 9,161 Grand Vitara models.

Friday's agreement is another victory for Matviyenko's administration, which has actively courted foreign carmakers in recent years. Suzuki's plant will be located on a 23-hectare plot south of Toyota's future plant in Shushary, just outside St. Petersburg. General Motors and Nissan are also building plants in the vicinity. Construction of the plant is slated to begin in the first half of next year.

Suzuki told reporters that the company had chosen St. Petersburg because of its proximity to Europe and the fact that other carmakers had set up shop here. South Korea's Hyundai plans to hold negotiations about building a plant in St. Petersburg, Vedomosti reported Friday. French carmaker PSA Peugeot Citro--n is in talks over a 300 million euro plant but has yet to decide on a location, the newspaper said.

A PSA Peugeot Citro--n spokesman said this week that the carmaker would sign an agreement for the import of car parts Saturday with the Economic Development and Trade Ministry at the St. Petersburg International Economic Forum, Reuters reported.

At Friday's ceremony, Matviyenko said her administration was holding talks about several automotive assembly plants but declined to describe them before final agreements were reached.

Nissan signed a $200 million agreement to build a plant in the city during the St. Petersburg forum last year.

Some 30 Japanese companies currently work in St. Petersburg, and Jetro, a Japanese government business lobby, is planning to open a branch in the city next month, Japanese Ambassador Yasuo Saito said.

"Russia is one of the best and most dynamic markets in the world," Saito said at the ceremony.

"Political relations are also moving forward," he added.