Volkswagen to Grow Russian Output With GAZ Group

ST. PETERSBURG – Volkswagen expands its partnership with Russia’s GAZ Group to broaden its range of models sold in the country and possibly add assembly of buses and heavy-duty trucks.

The announcement comes as the companies plan to double the number of exports of VW Jetta and Skoda Octavia and Yeti models at its plant in Nizhny Novgorod this year. Exports last year totaled 14,700 units, or 10% of all VW and Skoda cars produced in Russia.

Volkswagen Group Rus CEO Markus Osegovich says the automaker plans to double the number of exports from Russia in 2017. That will be achieved by adding shifts at Nizhny Novgorod and selling fewer Jetta, Octavia and Yeti models domestically.

The plant produced 37,096 units of the three brands combined in 2016. VW has not identified the other models that may be built at the facility.

VW and GAZ have invested $400 million in the plant, which opened in 2011. It has produced 200,000 vehicles, far below its annual capacity of 132,000 units.

Osegovich says expanded car production at Nizhny Novgorod a 25% share of VW’s and Skoda’s Russian production. The automaker’s Kaluga plant accounts for the remainder of its output in the country.

The 8-year agreement also calls for VW to supply German-built 2.0L TDI diesel engines to GAZ for installation in the next generation of GAZelle Next medium-duty vans and trucks. About 15,000 GAZelle vehicles were built at the GAZ plant last year.

The automakers are nearing agreement on production of GAZ trucks and vans on the platform of VW’s MAN and Scania brands, also at Nizhny Novgorod.

VW light-vehicle production in Russia increased 6.8% last year to 147,878 units after plunging 31.7% in 2015, according to WardsAuto data. GAZ production of 45,145 trucks was down 5.5% in 2016 from prior-year.