TOKYO (Reuters) - Toyota Motor Corp <7203.T> will invest around 18 billion yen ($181 million) to expand capacity at its St. Petersburg plant in Russia where it will start assembling its popular RAV4 SUV in 2016, the Japanese carmaker said on Wednesday. � While car sales have been declining for six consecutive months in Europe's second biggest market due to an economic slowdown, Toyota has seen sales of the RAV4 rise by 43 percent to 27,000 vehicles in the eight months to August.
"Demand is growing and the RAV4 has become Toyota's best-selling model in Russia, so we will start producing the model locally based on a longer term standpoint," Ryo Sakai, a Toyota spokesman said.
Russia grants incentives to encourage foreign carmakers to localise production and that would also help Toyota build more vehicles there, he added.
At the expanded plant, Toyota will build up to 50,000 RAV4 vehicles a year based on the complete knock-down system, the company said in a statement. The plant, where Toyota currently makes the Camry sedan, now has an annual capacity of 50,000 vehicles.
The RAV4 is the fourth best-selling SUV in Russia after Renault SA's (RNO.PA) Duster, General Motors Co's (GM) Chevrolet Niva and the Lada 4x4. The RAV4 accounts for nearly a quarter of Toyota's sales in Russia.
Lada is a brand of AvtoVaz, Renault and Nissan Motor Co's <7201.T> Russian unit.
Toyota has seen car sales in Russia drop 3 percent year-on-year this year, compared to a 7 percent decline in overall car sales in the country.
Sales have grown in recent years. In 2012, the world's best-selling carmaker sold 169,000 vehicles in Russia, up 26 percent from 2011, while Russia's total auto demand rose 11 percent to 2.94 million vehicles, Sakai said.
($1 = 99.3450 Japanese yen)
(Additional reporting by Megan Davies in MOSCOW; Editing by Jeremy Laurence and Miral Fahmy)