VW Looks to Exports to Shore Up Russian Operation

ST. PETERSBURG – Volkswagen will export engines from Russia in a bid to overcome sluggish car sales in the country and take advantage of the declining value of the ruble.

Anatoly Artamonov, governor of the Kaluga region in Eastern Russia, says the automaker will export 1.6L engines from a plant in the city of Kaluga. The €250 million ($283 million) facility, which has the capacity to produce 150,000 engines per year, opened earlier this month and is supplying engines to Russia-built VW and Skoda models.

Miroslav Kroupa, head of VW’s Skoda subsidiary for Russia and the Commonwealth of Independent States, says the plant was designed to only supply engines within Russia, but declining auto sales have prompted the automaker to export 25% to 30% of output to Europe, Automotive Logistics reports.

Sales of VW- and Skoda-branded cars in Russia fell 39.1% in July from prior-year and were down 41.7% year-to-date, while overall light-vehicle sales in Russia were down 27.5% in July and 35.3% year-to-date, WardsAuto data shows.

Volkswagen also has commissioned Nemak, one of its global parts suppliers, to manufacture cylinder blocks and cylinder-head components at its Ulyanovsk plant for export mainly to European Union markets.

Sources close to VW say the automaker also will ship painted car bodies from its Russian production facilities to the U.S. and other foreign markets, and is considering exporting completely built-up units produced at its Kaluga plant to the EU by the end of the year.

Volvo Russia, meanwhile, plans to begin exporting Russia-built vehicle cabins to plants elsewhere by Oct. 1, CEO Peter Andersson says. French automaker PSA Peugeot Citroen is considering exporting parts produced by its Russian suppliers.

At least one supplier, China’s Fuyao Glass, says it will begin exporting from its 2-year-old plant in Kaluga mainly to EU states, particularly Germany, Belgium, Spain and France.

In the meantime, the Russian government is providing additional support for domestic auto-parts manufacturers. The Ministry of Economic Development says it will adjust the formula for calculating the level of localization of parts production to take currency fluctuations into account.