Richest Russian Says He'll Launch a City Car

ST. PETERSBURG, Russia — Russia's richest businessman, through his company, is planning to launch production of a new low-cost city car in Russia. Mikhail Prokhorov's Onexim Group will produce the car, which could be either a hybrid or an electric vehicle, at the Yarovit Motors auto plant here.

Prokhorov has been in the news in the U.S. recently through reports that he is awaiting NBA approval on his proposed acquisition of the New Jersey Nets basketball team.

Russian media are saying Onexim will use "advanced technology" for the new car and that the design is still in the works. Analysts believe the firm is deciding whether to make it an electric car or a hybrid.

The total amount of investments in the new project is estimated at nearly $141 million, and the new car is expected to be priced under $12,500. Industry observers are saying the project appears to have no chance of success — even though there are predictions that demand in Russia for cars in the low-cost segment will make a significant leap. The sentiment is that the investment will need to be much higher — in the billions — and the shortage of EV batteries and other components in Russia will be a major obstacle to Onexim.

If it does launch, the new car will have to compete with established automakers including General Motors, Volkswagen and Mitsubishi, which have already said they will start building sub-$10,000 cars in Russia in the next two years.

Prokhorov has no experience in the automotive business, but became famous due to his interest in various innovative projects. According to experts, despite the fact that currently Oneksim has a good financial base, such a project can only be implemented with the financial support of the state.

Inside Line says: Experts say only government money can get this project off the ground, despite Onexim's deep pockets, and they may be right. — Evgeniy Vorotnikov, Correspondent