General Motors ends presence in Russian car assembly business

The US carmaker will sell its stake to AvtoVAZ

General Motors ends presence in Russian car assembly business
Photo: needpix.com

American car manufacturer General Motors is pulling out of its joint venture with AvtoVAZ producing Chevrolet Niva SUVs in Togliatti. The Russian partner is going to buy out the GM’s stake, so after “a certain period of time”, the Togliatti plant will switch to the Lada brand.

Russia’s biggest automaker AvtoVAZ is buying out General Motors’ stake from their Russian joint venture, reports Reuters, adding that the move is effectively ending GM’s presence in car assembling in the country. According to the agreement signed on 9 December, AvtoVAZ will buy GM’s 50% share in the venture producing vehicles in Russia under the Chevrolet brand. The Russian carmaker did not disclose financial details of the deal.

The Chevrolet Niva SUV is currently assembled by a factory in Togliatti with the capacity to make up to 100,000 cars a year. Its design was based on the Soviet-era Niva off-road vehicle and developed further with GM’s input. The agreement envisages that the Togliatti factory will continue producing and selling cars under the Chevrolet brand for “a certain period of time” before switching to the Lada brand.

The Russian car market was among Europe’s top performers before 2014 when the imposition of Western sanctions coupled with falling oil prices sharply weakened the ruble. As a result, the population’s purchasing power decreased and buying a new vehicle became an expensive pleasure for an average Russian. That’s why foreign carmakers started to rethink their strategies of doing business in Russia. This year, Russia’s automobile market has again faced difficulties. According to the Association of European Businesses, new car sales in November decreased by 6,4% compared to the previous year.

The design of Chevrolet Niva was based on the Soviet-era Niva off-road vehicle. Photo: petr-r

However, the deal doesn’t mean that General Motors is totally leaving the Russian market, as the company’s products will still be offered there, says AutoIndustriya.com. GM has three Chevrolet vehicles officially sold in Russia, namely Tahoe, Traverse and Camaro, all of which are produced in North America. Cadillacs are sold in Russia as well.

The US carmaker has been slimming down operations for the past couple of years. They have already sold their Opel and Vauxhall subsidiaries in Europe and left several Asian markets with Indonesia being the most recent one. Besides, GM has shut down several assembly lines both in and outside of their home market of North America. It allows the carmaker to reduce costs by simply having distributors rather than dealing with (and spending for) day-to-day operations of an automotive plant.

By Anna Litvina