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The European Bank for Reconstruction and Development (EBRD) has agreed in principle to finance the entry of Toyota Motor Corporation as a car manufacturer in Russia, where the Japanese group plans to build an assembly plant outside St Petersburg. The Japanese company’s first Russian plant will have an annual capacity of 50,000 cars.

The EBRD will acquire a maximum 20% stake in the project, known as OOO Toyota Motor Manufacturing, for up to US$15mn. The new plant’s first Toyota Camry family sedan passenger car is expected to roll off the assembly line in late 2007.

Before this project, the EBRD had signed deals worth US$431mnin the Russian auto sector, or nearly 6% of its overall Russian commitments to date. The Toyota project represents the second EBRD investment in a greenfield car production plant in Russia in four years.

The EBRD brings to the project its considerable experience of working in the Russian market and strong presence in St Petersburg, says Steven Kaempfer, EBRD vice-president, finance.

One of the pillars of the EBRD’s strategy in Russia has long been to help the auto sector, and the bank places great hopes on the knock-on effect that this plant, which will introduce new technologies to Russia, should have for related industries locally, Kaempfer adds.

Russian car ownership is estimated at 157 cars per 1,000 people – comparable with Argentina but far below the Polish average of about 250. A combination of income growth and the high average age of the Russian car fleet are expected to fuel future demand, which is expected to grow to east European levels.

EBRD’s new commitments to Russia in 2004 totalled €