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Toyota Says "Da"

As recently as eight months ago, when asked about its plans for the Russian market, Toyota Motor Corp (NYSE: TM  ) adopted no more than a pozhiyom, uvidyem ("we'll wait and see") stance. In an interview last March, Toyota's president, Fujio Cho, told London's The Times that the company might set up shop in Russia "eventually," clarifying that this was something that could happen within the next 10 years.

My, how time flies. According to three separate news reports last week, Toyota has decided to take the plunge. The reports differ only on the company's planned location, with two papers saying the nod will go not to Moscow, but to Russia's "second capital," St. Petersburg, and the Russia Journal breaking ranks to say the factory will go to the small Moscow region city of Remmash. Judging from past experience among foreign investors, it seems likely that Toyota will ultimately settle on St. Petersburg. That city is locked in a continual price war with the surrounding Leningrad region over who can better woo foreign investors with generous tax incentives.

Wherever the plant eventually goes, it will be the first Japanese plant assembling cars in Russia, where Nissan (Nasdaq: NSANY  ) and Honda (NYSE: HMC  ) have not yet set foot. Still, the Koreans are there already. And the Americans too, represented by both Ford (NYSE: F  ) and General Motors (NYSE: GM  ) . German-American hybrid DaimlerChrysler (NYSE: DCX  ) , incidentally, is also said to be considering setting up a factory in St. Petersburg.

But while this may be the first Japanese plant in Russia, it won't be Toyota's first foray into Eastern Europe. The company already has factories planned to go on line in Poland and the Czech Republic next year (the Russian plant is anticipated to start operations in 2006).

At first glance, it seems a little strange for Toyota to build factories in countries where the per capita income is just a fraction of the price of its cheapest cars. But that's just what many automakers, Toyota included, are doing in China. And given the company's aggressive goals for growing market share in wealthier Western Europe -- where it already commands a 5.4% share and has overtaken Mercedes -- setting up supply centers in low-cost Eastern Europe actually makes a lot of sense. It could well be that, while it's building the cars in Russia, the company actually intends to sell them a few hundred miles to the West.

For more Foolish news on Toyota, read:

Fool contributorRich Smithhas no position in any company mentioned in this article.

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