Discussions between Volkswagen AG and Russia's GAZ on setting up a Russian vehicle assembly plant are advancing, according to Europe's biggest carmaker. Last September, Volkswagen CEO Martin Winterkorn said that VW is talking about an assembly deal with GAZ. Foreign carmakers get tax breaks when they opt for local assembly.
Volkswagen’s plant in Kaluga can produce 150,000 units a year. Last Wednesday, the Financial Times said that Volkswagen seeks to assemble up to 150,000 vehicles under contract in Nizhny Novgorod if talks with GAZ push through.
According to a Volkswagen spokeswoman, this figure is wrong but she declined to make clarifications or give further details. Russian automakers, who struggled in the country’s worst recession in 15 years, have been turning to foreign expertise to increase gain market share and so that they can offer vehicles that can compete with Western brands.
Because foreign carmakers want to benefit from the tax breaks offered to locally produced vehicles, they have been raising production in Russia. One example is Hyundai Motor Co. that is set on opening a plan in Petersburg later this year.
GAZ, which is controlled by industrial tycoon Oleg Deripaska, is the only major Russian player that doesn’t have support from a major foreign manufacturer. [via autonews - sub. required]