VW shows how to take Russian carmaking forward

While Avtovaz has been pushed to the brink by a 50% sales slump during the economic downturn, German giant, VW, has been pumping huge investment into Russia with big plans to expand.

What was a classic greenfield site in Kaluga just three years ago is today a state-of-the-art carmaking plant. Now it’s launching a complete-cycle production-line for 6 Volkswagen and Skoda models – with a ‘Made in Russia’ label.

It’s probably the first good news to come from the Russian carmaking industry in recent months –reeling from a collapse in demand. Jaroslav Holocek, Personnel director from VW Russia, says the fundamentals of the Russian market were enough to keep the money coming for the Kaluga plant.

"Of course we all suffered from the crisis, but we find the Russian market very attractive for investment"

Visiting Prime Minister Vladimir Putin described the plant as an industrial city. He said the smart management which created it gives inspiration that Russian carmarkers can steer their way out of crisis.

"I have no doubts that they're capable of coping with current problems, upgrading production and turning out competitive goods, which are in demand now. We'll be providing comprehensive assistance to domestic car manufacturers."

Despite the market slump, WV remains the biggest foreign investor in the Russian car industry with a 6% market share. €570 million has been injected into the Kaluga plant since 2006. Investment kept flowing even during the worst of the credit crunch – with almost one hundred million euro more to be ploughed-in next year.

Employees at the VW plant know about the crisis, but its not at their work place. At a time when most carmakers halted production and cut thousands of jobs VW expanded. Not a single worker has been laid off during the slump.

Quite the opposite in fact: with plans to make one hundred and fifty thousand cars a year for Europe’s largest car market, the company plans to nearly double the workforce here. With Canadian car-parts maker Magna also building a plant in Kaluga, international carmakers are leading the way to securing the future of the industry in Russia.