August 28, 2012 / 2:58 PM / 6 years ago

Volkswagen to invest 1 billion euros in Russia

MOSCOW/FRANKFURT (Reuters) - Germany’s Volkswagen (VOWG_p.DE) said on Wednesday it is aiming to invest a total of one billion euros ($1.25 billion) in Russia by 2018, initially expanding by building an engine plant in Kaluga.

A Volkswagen logo is pictured during the second media day of the 81st Geneva Motor Show at the Palexpo in Geneva March 2, 2011. REUTERS/Denis Balibouse

The company said that Russia is its primary strategic growth market in Europe and by 2018 it aims to sell half a million vehicles in the country annually.

Russia’s car sales are expected to rise 6 percent in 2012 year-on-year, a deputy trade minister said earlier this year. Car sales totalled 2.65 million units in 2011, up from a forecast of 2.6 million.

Volkswagen will invest 250 million euros in the construction of the plant in Kaluga, a town some 190 km (118 miles) south-east of Moscow. The plant will produce one of the most up-to-date engines, it said, starting from 2015.

The company has already invested 1 billion euros so far in Russia, meaning by 2018 it will have invested 2 billion euros, it said on Tuesday.

Russia was on course to become Europe’s biggest car market before the financial crisis, but a collapse in demand as credit dried up caused sales to halve in 2009.

Reporting By Megan Davies and Ludwig Burger, Editing by Alexei Anishchuk

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