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EBRD to invest €30 mln for Volkswagen Russian plant stake

Automotive

The EBRD plans to invest €30 million ($38 million) in exchange for a 20% stake in Volkswagen's plant in Russia to help modernize the country's automotive technology.

Volkswagen AG, Europe's biggest carmaker, broke ground for the factory in Kaluga, 160 kilometers (99 miles) southwest of Moscow, October 28. The plant, scheduled to begin production at the end of 2007, will cost €425 million, with €150 million in the form of equity and the rest financed through a syndicated loan, the London-based European Bank for Reconstruction and Development said in a statement on its Web site yesterday. Carmakers have invested in Russia as economic growth encourages consumer spending. Automobile sales will almost double to 2.8 million vehicles a year by 2010, according to a forecast by Troika Dialog, a Moscow-based brokerage. Wolfsburg, Germany-based Volkswagen signed a contract with the Russian government in May to build the plant to assemble 115,000 vehicles a year. Volkswagen's namesake brand will develop an entry-level car specifically for the Russian market to be built at the plant. The vehicle will be based on the Polo small car and sell for less than €10,000. The plant will also build the Skoda brand's Octavia model. The EBRD will consider the Volkswagen investment for approval at a board meeting December 5, the bank said. (Bloomberg)

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