Sold factory in Kaluga
End of Volkswagen’s Russia business sealed
05/19/2023, 2:16 p.m
The withdrawal of western car manufacturers has led to a significant slump in vehicle production in Russia. Now Volkswagen is also selling its most important plant in Kaluga. The search for a new contractual partner in Southeast Asia is ongoing.
The VW Group is selling its most important factory in Russia and is completely withdrawing from the country for the time being. The plant in Kaluga will be sold to the Russian trading group Avilon, the Wolfsburg company announced. After earlier steps in connection with the Ukraine war, the decision de facto marks the end of an independent Russia business at Europe’s largest car group.
According to media reports this week, VW had previously received approval in Moscow to sell its assets in Russia to Avilon for 125 million euros. The Interfax news agency reported on Tuesday in Moscow, citing negotiating circles, that the government commission for the control of foreign investments had approved a corresponding application. The state-of-the-art factory in Kaluga, around 150 kilometers southwest of Moscow, with a good 4,000 employees, is considered to be VW’s most important asset in Russia. According to Russia’s Deputy Prime Minister Denis Manturov, the search for a contractor from Southeast Asia is already underway to put the production facility back into operation.
Slump in vehicle production in Russia
The sale was delayed by a lawsuit from former VW manufacturing partner Gaz – known for building the Volga sedan in Soviet times. Gaz had sued VW for damages in the three-digit million range for terminating the agreement. A court in Russia has since dismissed the lawsuit. The withdrawal of Western carmakers from Russia has led to a significant slump in vehicle production in the country. According to the AEB business association, only 687,000 new vehicles were sold in 2022 – the year before there were 1.667 million new vehicles. In the meantime, some plants have been taken over by Russian investors; often at a symbolic price and with a buyback option. For example, the French carmaker Renault handed over its majority stake in the Lada maker Avtovaz to the Russian state for one euro last summer.
Shortly after the attack on Ukraine, VW suspended production in what were then two factories in Russia in March 2022. The export of vehicles to the giant country had also been stopped for all group brands, but the fundamental future of VW there remained open for the time being. Now the contracts are signed. There were different scenarios for the factory in Kaluga. However, Volkswagen gave up the Nizhny Novgorod assembly plant back in May. There they had operated a joint production with the Russian car manufacturer Gaz – whose co-owner Oleg Deripaska came up with Western sanctions lists.
In Moscow, VW has had offices for imports, finance and sales with around 300 employees, who are also to be transferred to Avilon. The truck and bus subsidiary MAN has ended production in St. Petersburg. The same applies to their leasing activities. The Scania brand, which also belongs to the Traton commercial vehicle division, previously transferred its financial business to the group’s Russian company.