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In Face of Sanctions and Weak Demand, VW Halts Production in Russia

Volkswagen-Russia-Factory-Kaluga-Production-Hall-Plant-Car-source-DPA
Switch off the engine. Volkswagen employees at the carmaker's plant in the Russian city Kaluga will be polishing less cars due to the temporary shutdown.
  • Why it matters

    Why it matters

    German automakers are seeing demand slow down in Russia and predict lower sales due to a lack of consumer confidence and the shrinking Russian economy.

  • Facts

    Facts

    • VW has reduced production in Russia due to a fall in demand.
    • The European Union is set to extend the sanctions against Russia; currently they affect finance, military and dual use goods, and energy production.
    • The Russian economy is weak not only due to the sanctions but also slow reforms and stalling development.
  • Audio

    Audio

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Volkswagen has halted production at a Russian plant as a faltering economy, further undermined by Western sanctions and the crisis in Ukraine, hits demand in the country.

Germany’s biggest automaker has decided to stop car production for at least two weeks beginning on Monday at its plant in Kaluga, lowering production to 120,000 instead of the 150,000 originally planned for the year.

In July, before the imposition of Western sanctions in response to Russia’s backing of a separatist revolt in Ukraine, the company had announced plans to hire more workers at the plant.

The Kaluga plant manufactures the Volkswagen Polo and Tiguan models as well as the Skoda Fabia and Octavia.

The German company is reacting to the sharp drop in Russian demand, following the lead of other carmakers. General Motors had already announced in August that it would only produce for four to eight days a month at its factory near St. Petersburg.

German auto parts suppliers are also reported to be seeing a drop in orders and are putting off investment plans in Russia.

In general, the impact of sanctions and the huge drop in the value of the Russian currency, the rouble, have had a hugely detrimental effect on Europe’s second most important car market. In July, the number of new car sales fell by 22.9 percent from the same month a year ago, according to the Association of European Businesses. The sales of VW cars has dropped by 15.7 percent. Seat has seen a 54.4 percent reduction, while Ford sales have dropped by 41 percent, Peugeot’s by 34 percent and Opel by 17 percent. Audi has only lost 2.7 percent and Skoda only 1.1 percent.

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