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. Last Updated: 07/27/2016

Spain's SEAT Drives Back Into Russia

Spanish carmaker SEAT on Wednesday announced that it was returning to Russia to cash in on growing car sales, two years after pulling out of the country's booming automotive market.

SEAT, which had previously declined an offer from its parent company Volkswagen Group to open a network of dealerships in the country, is returning on the back of Poland's Iberia Motor Company, which has also been selling the Spanish-made cars in Ukraine, Belarus and the Baltic states.

"Russia is the most interesting market in Europe and I would even say that for European producers it is the most interesting in the world," said Arkadiusz Mietkiewicz, vice chairman for Eastern European markets at Iberia Motor.

The Polish company's Russian subsidiary, Iberia Motor Rus, began operations in April and has signed agreements to sell cars in some 11 towns with a population of 1 million, Mietkiewicz told a news conference during the InterAvto motor show.

"Dealers believe that the cars will sell very well," he said.

The company plans to open around ten to twelve dealerships by year-end and to grow to 30 dealerships in 2008 and 40 dealerships the year after, he said. It plans to sell at least 2,500 units next year, Mietkiewicz said. Plans for 2009 envision the sale of at least 5,000 units.

SEAT's decision to pull out of Russia in 2005 raised some eyebrows in the country, where sales of new foreign cars outsold domestic models for the first time last year. In 2006, Russians bought 1 million new foreign cars, both imported and assembled locally, up from 560,000 in 2005, according to PricewaterhouseCoopers.

Analysts said poor brand awareness could have contributed to sluggish sales and the company's departure. SEAT sold 157 cars in 2003 and only 87 vehicles in 2004, Vremya Novostei newspaper reported.

Internal problems like poor communication within the group were also to blame, said Mietkiewicz, adding that the carmaker was now "prepared to come to Russia."

The company plans to spend 6 million euros ($8.2 million) on marketing next year, Iberia Motor Rus general director Thomas Dorenwendt said.

"I hope the SEAT brand will gain recognition in the Russian market in two to three years," Spanish Ambassador Francisco Javier Elorza Cavengt told reporters, noting the importance of the automotive industry for his country's economy, which generates 5 percent of Spain's gross domestic product.

SEAT would consider assembling its cars in Russia after it sells 20,000 units in the country, Dorenwendt said.