GM Ending Russian Production

Russian analysts have long expected GM’s departure from the joint venture, in part because soon-to-be-former partner AvtoVAZ markets an all-wheel-drive Lada that competes against the Niva.

Eugene Gerden, Correspondent

December 13, 2019

2 Min Read
Chevrolet Niva (Russia)
Chevrolet Niva derived from AvtoVAZ’s Lada Niva.

ST. PETERSBURG – General Motors will abandon its manufacturing presence in Russia as it announces an agreement to sell its 50% stake in its joint venture with AvtoVAZ, the country’s biggest automaker.

The GM-AvtoVAZ JV has been producing the Chevrolet Niva compact CUV, the U.S. automaker’s last Russia-built model, since 2002. Production of Niva models under the Chevrolet brand will continue for a “certain period of time,” the partners say, until the vehicle is renamed and marketed under AvtoVAZ’s Lada brand.

The agreement also calls for a new AvtoVAZ SUV to be built at the plant in Togliatti in southwest Russia.

Russian antitrust authorities have approved the sale, terms of which have not been disclosed.

AvtoVAZ says existing contracts with Niva suppliers and dealerships will remain intact during the transition.

GM will continue to sell Cadillac and Chevrolet models in Russia. It is expanding its range of premium Cadillac SUVs in the country.

The JV was GM’s last asset in Russia after it closed its St. Petersburg plant (with a search for buyers continuing) in 2015 amid a financial crisis in Russia that depressed auto sales. Also in 2015, GM and AvtoVAZ announced plans to update the Niva but no progress was made.

Russian analysts have long expected GM’s departure from the JV, in part because AvtoVAZ markets an all-wheel-drive Lada that competes against the Niva. They also cite the cost of updating the Niva and disagreements between GM and French automaker Renault, which  indirectly owns two-thirds of AvtoVAZ.

The JV’s assembly plant in Togliatti, about 500 miles (850 km) southeast of Moscow, has estimated capacity of 98,000 units per year. Last year, however, only 31,332 vehicles were built there and just 1,950 Nivas were sold in November, down 17.5% from year-ago.

The partners had planned to expand capacity to 120,000 units by 2015. But the expansion would have required a $200 million investment and, coupled with the ongoing downturn in the Russian market, the plan was never implemented.

The GM-AvtoVAZ JV was one of the first enterprises in the Russian automobile industry involving foreign investment. The companies formed the JV in 2001, each holding a 41.61% stake in the project and the European Bank for Reconstruction and Development holding the remaining 16.78%. The two automakers bought out the bank’s stake in 2012.

In January 2019, Alliance Rostec Auto, a joint venture between the Renault-Nissan-Mitsubishi Alliance and the state-owned Rostec industrial conglomerate, purchased 100% of AvtoVAZ. Renault now owns 67.6% of the Russian automaker.

 

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