Ailing Russia Market Not Sidetracking VW Investment

ST. PETERSBURG – The Russian automotive market’s current struggles are not disrupting Volkswagen’s plans to invest €1 billion ($1.1 billion) in new models and a new engine plant through 2017.

The €275.5 million ($250 million) engine plant in Kaluga, with daily maximum capacity of  600 units, will be commissioned by year’s end. Miroslav Kroupa, director-Skoda Auto Russia and CIS Region, says the plant will supply 1.6L engines to both the local market and the VW subsidiary’s European plants.

Only one other global automaker, the Renault-Nissan Alliance, is manufacturing engines in Russia.  The alliance, which owns a majority stake in Russian automaker AvtoVAZ, in 2013 launched production of 1.6L K-series engines designed for the Nissan Almera and AvtoVAZ brand Lada’s Largus models.

In addition to engines, VW several weeks ago began production and sales of the new generation of its popular Polo sedan at its Kaluga plant. This followed the recent production launch of new versions of the Touareg CUV and Jetta sedan at the facility.

Marcus Osegowitsch, head of Volkswagen Group Rus, says the automaker’s Russian subsidiary has no plans to cut staff and will continue to regularly update and expand its local product range. Expansion will give priority to sedans over subcompact city cars such as the Volkswagen Up! and Skoda Citigo, for which demand is low.

The Russian government has been supporting automakers through car-scrappage programs and creating greater access to credit, he says.