VW deepens ties with Russia's GAZ in cars and trucks

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Reuters  /  June 15, 2017

Volkswagen is strengthening its presence in Russia with projects to boost its VW and Skoda brands as well as commercial vehicles as the automaker positions itself for a rebound in the Russian market.

VW said on Thursday it had extended a deal with Russia's GAZ group to assemble VW brand and Skoda cars until 2025. As part of the agreement, VW will also supply 2.0 litre diesel engines to light commercial vehicles made by GAZ.

The prolonged decline of the once-booming Russian car market caused General Motors to leave in 2015 but VW has kept investing and started making engines at a new plant in Kaluga, some 170 km (105 miles) southwest of Moscow two years ago.

Volkswagen is the world's biggest carmaker by sales and is the leading foreign automaker in Russia by sales and revenue.

In a separate statement, VW said its truck and bus division had signed a letter of intent with GAZ to examine a long-term business cooperation in commercial vehicles.

The two companies are considering a strategic partnership for supplies and joint assembly of components, and possible projects will be examined in a next phase, VW said.

GAZ already uses components from VW's Scania and MAN heavy-truck divisions for its buses.

"With this letter of intent, we are taking another important step in our global champion strategy and are clearly demonstrating our commitment to the Russian market," VW trucks chief Andreas Renschler said.

Car deliveries in Russia by the VW group, which includes the luxury Audi and Porsche brands, fell 4.3 percent to 166,900 last year. But there are signs of a rebound as Russian new car sales rose 6.9 percent in April and 15 percent in May.