Volkswagen AG and GAZ Group signed a memorandum of understanding for a joint venture to produce VW Group's VW and Skoda brand cars at the GAZ plant in Nizhny Novgorod, Russia.
According to their deal, GAZ will assemble the Volkswagen Jetta, Skoda Octavia and Skoda Yeti models that are meant for the Russian market. The first model to be produced here is the Skoda Yeti small SUV. Output will start towards the end of 2012.
In a statement, Martin Winterkorn, CEO of Volkswagen, described the Russian market as a “growth engine” for the car industry as well as being “an important pillar” for its Strategy 2018.
Winterkorn said that he expects that the rapid increase of production capacity with the help of GAZ will considerably reinforce VW’s standing in this key market. VW is planning to expand its Kaluga plant so that it can comply with the rising demand for its cars in the Russian market.
Last Tuesday, VW revealed that sales of its core VW brand in Russia nearly doubled in May to 34,400 cars, a 99.1% increase compared to the same period in 2010.
Volkswagen plans to invest about 200 million euros so that the Nizhny Novgorod plant will be expanded and modernized. Its existing paint shop and assembly facilities will be modified. A new body shop will also be built. This contract is effective until 2019. Under the deal, VW intends to build 110,000 vehicles annually at the plant.