Russian Roadblock for New-Gen Chevrolet Niva Lifted

ST. PETERSBURG – A new-generation Chevrolet Niva will make a belated debut on the Russian market as GM-AvtoVAZ obtains a loan from Sberbank, Russia’s largest state-owned bank, to build a new assembly plant.

The compact SUV will be built at the GM-AvtoVAZ joint venture’s Togliatti factory in the Samara region, 400 miles (640 km) southeast of Moscow. The U.S. and Russian automakers are developing a production schedule of up to five years, AvtoVAZ President Nicolas Maure says.

The loan amount has not been disclosed, but the initial investment in the project is estimated at RR15 billion ($250 million). Nikolay Merkushkin, governor of the Samara region, says a successful launch of the project will allow GM-AvtoVAZ to increase spending up to RR100 billion ($1.5 billion) per year during the next several years.

GM-AvtoVAZ says the new-gen Niva will contain a high level of localization and will attract domestic parts suppliers. The project as planned includes a car-body assembly facility and a new engineering and logistics center.

The Russian and Samara governments confirm they will provide incentives associated with Togliatti’s duty-free economic zone, which includes reduced income taxes and temporary suspension of property taxes.

GM-AvtoVAZ displayed a new Niva concept at the 2014 Moscow auto show. But Russia’s developing financial crisis, marked by the ruble’s falling value and the effects of Western economic sanctions, prompted the JV to indefinitely suspend the project.

Funding for the project initially was to have been provided by Vnesheconombank, another large state-owned bank, but its inclusion among the sanctioned Russian businesses precluded the signing of an agreement.

According to Association of European Business data, Niva production totaled  34,218 units in 2015, down 24% from prior-year, while sales in Russia declined 28% in the same period. However, the SPARK-Interfax business-data agency says GM-AvtoVAZ  in 2014 posted a net profit of  RR1.4 billion ($21.1 million) on RR19 billion rubles ($287 million).