Hello, we must be going. A GM Niva rolls down the Avtovaz assembly line. Avtovaz is buying GM’s plant there.
Long the world’s largest best-selling automaker, General Motors has been on a decadelong retreat, and it’s set to downsize even more now that it has agreed to sell off its Togliatti assembly plant, effectively ending its participation in the once-promising Russian automotive market.
The factory, built in 2001, is being purchased by former joint venture partner Avotvaz. Originally known as Volzhsky Avtomobilny Zavod, it was best known for products built under the Lada brand. But the joint venture with GM has been rolling out vehicles bearing the Chevrolet bowtie.
The U.S. automaker’s presence in Russia has been shaky for a number of years, GM officials first suggesting they might pull out in 2015. Under Chairman and CEO Mary Barra, the company has trimmed back a number of its global operations, most notably selling off its European Opel/Vauxhall unit two years ago to France’s PSA Peugeot Citroen.
(GM completes sale of Opel/Vauxhall to France’s PSA)
The Togliatti factory, located on the Volga River, about 500 miles outside of Moscow, has a capacity to build about 100,000 vehicles annually, though the Chevy Niva it currently assembles is still based on a Soviet-era design that has been modernized for current crash and emissions standards.
Avtovaz built Ladas at the Togliatti plant in the past.
When it opened, nearly two decades ago, Russia was in the midst of a rapid transformation after the fall of the Soviet Union. It emerged as one of Europe’s fastest-growing automotive markets, with a population of nearly 150 million people, many desperate to purchase the automobiles that were largely out of reach by average citizens under the USSR.
But after surging during the first years of the new millennium, demand began tumbling sharply, hammered first by global recession and then the western sanctions imposed on Russia. The market’s overall year-over-year sales were off 6.4% in November, according to the Association of European Businesses, with demand during the first 11 months of 2019 down 2.8 percent.
The market is “on the path of a slow but continuous erosion,” AEB Chairman Joerg Schreiber last month warned.
(GM “absolutely” could re-enter Europe, says CEO Barra, or exit even more markets)
GM has been wavering in its commitment to Russia, first warning it might pull out in 2015. The sell-off of the Togliatti plant ends its internal debate.
Since taking on the reins as GM CEO in 2014 – and subsequently adding chairman to her title – Mary Barra has broken with the automaker’s long strategy of positioning itself as the world’s largest automaker, even if that meant maintaining money-losing operations that showed little chance of a turnaround.
GM’s Mary Barra continues to reshape the automaker.
The Detroit automaker has now abandoned a wide range of markets including Russia, South Africa and the rest of Europe. It continues to produce vehicles in India, though GM has shuttered its retail operations in that country.
As a result of Barra’s retrenchment strategy, GM is now the world’s fourth-largest automotive manufacturer, behind Volkswagen, Toyota and the Renault-Nissan-Mitsubishi Alliance. At its peak, in 2016, its global volume hit 10.01 million, declining to 8.38 million just two years later.
GM is not unique in its decision to pull-out from Russia, however. Its Detroit rival, Ford Motor Co., announced its decision to make a similar move last March, having watched sales plunge from 130,809 in 2012 to just 53,234 last year.
(Mary Barra considers radical reshaping of GM)
Despite the market’s problems, however, not everyone is ready to write off Russia. Among those betting on a market turnaround is France’s Groupe Renault, which owns a controlling stake in AvtoVaz. And, ironically, the Opel brand, which GM had previously pulled out of Russia, is making its return to the market under new owner PSA.