Amid VW’s Dieselgate scandal, Russia’s strained relations with Europe and the US and the auto industry’s search to green itself, Volkswagen has deepened its ties to a Russian automaker to make diesels.
VW, battling the ongoing Dieselgate crisis, signed a letter of intent to supply diesel engines to GAZ, a Russian carmaker based in Nizhniy Novgorod in the Volga District.
It is a bet against the dim outlook on the Russian car market which has contracted amid a decline in real income. In 2016 the country had a poor year as sales of passenger vehicles were down 11 percent and carmakers such as GM have withdrawn. VW, though, is the leading foreign carmaker in Russia and is positioning itself for a rebound. Luxury carmaker Mercedes Benz is also investing in the country.
VW and GAZ have been working together for six years as GAZ, owned by Russian Machines, makes Skodas and Volkswagens and under the agreement will assemble other models too, through 2025. VW, meanwhile, will supply diesel engines for GAZ’s Gazelle Next brand.