VW Group launches Russian crusade

VOLKSWAGEN Group has opened its first assembly plant in Russia as it seeks to gain a foothold in the booming market.

VW Passat and Skoda Octavia models will be assembled at the new factory located in Kaluga, south-west of Moscow, that represents an investment of more than 500 million Euros by the VW Group.

The new plant was inaugurated this week by VW Group chairman Martin Winterkorn and Russian Federation deputy prime minister Sergey Naryshkin.

VW Group expects to build 60,000 vehicles at the plant in the first year, before increasing to 150,000 in 2009.

It is planned for the plant to begin production using its own body shop, paint shop and final assembly line during 2009.

Sales of foreign vehicles in Russia have grown by more than 60 per cent this year and VW is keen for a slice of the action.

Toyota has also announced it will soon open its own plant to serve the Russian market near St Petersburg.

Tax breaks and other incentives are expected to lure more brands to open Russian plants, but there is also some concern about rising wage demands.

Reuters reports that workers at Ford’s Vsevolozhsk, near St Petersburg, went on strike this year demanding a 30 per cent pay increase and shorter night shifts.