Petro-dollars boost new car sales in Russia

In the Soviet Union, Russians queued for years to buy a car unless they had friends at the car plant

In the Soviet Union, Russians queued for years to buy a car unless they had friends at the car plant. Now, Russia is awash with petro-dollars, and the car queue is back. Today's queues are more orderly, though, with places changing hands on the internet for hundreds of dollars.

The Russian economic boom caught foreign car makers by surprise. They are struggling to keep up with demand in a market expected to be worth $30 billion (almost €24 billion) by 2010.

Luxury cars are prized in the swelling ranks of Russian millionaires. In the 1990s a black Mercedes 200, accompanied by squads of chase cars, was the uniform symbol of wealth and power. Now rich motorists want vehicles that set them apart from the crowd.

Mercury, the exclusive importer of Bentleys to Russia, opened its first shop in 2003 not far from Lenin's tomb in central Moscow. Marat Steblev, a Mercury spokesman, predicted that Bentley sales would total 300 this year, triple the amount in 2004.

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Nissan has chosen Russia as the first stop in its drive to globalise sales of the Infiniti cars, until now sold exclusively in North America.

Russian orders for the new Jaguar Sports XK-R piled up even before the model was unveiled at the London motor show in July.

Sergei Gurdzhian, marketing manager at Jaguar Land Rover Russia, says: "In the Soviet Union everyone had to conform. Now people aren't afraid to be different, and they are thinking about style and taste."

However, the greatest potential for growth is in the market for low- to mid-priced cars. Average Russian salaries of $450 (about €360) a month are still low by European standards. But the growing availability of retail credit, leasing and trade-in schemes are bringing cars within reach of more people.

The Lada, built by Avtovaz, Russia's biggest car maker, is still by far the best selling cheap car in Russia. But if they can afford them, Russians want to buy more reliable, better-looking foreign vehicles.

Government Order 166, passed last year, offered tax incentives to foreign companies willing to invest in car assembly ventures in the hope of jump-starting local manufacturing and component industries.

Since then car manufacturers from around the globe, including Toyota and Nissan of Japan, Volkswagen of Germany, and China's Great Wall have rushed to set up assembly ventures. Along with China, it's the place to be in the car industry.