Contract manufacturing has become big business, revitalizing the Russian automotive industry. Glenn Brooks begins his report with a look at GAZ.

One of the most important companies in Russia’s highly competitive contract manufacturing business is GAZ Group. The firm, based in the city of Nizhny Novgorod, gave up on building its own cars in 2009 after a Chrysler-based sedan, the Volga Siber, proved to be a sales flop. Build was suspended in April 2009 after just nine months of low-scale production. The decision was eventually taken to abandon the Siber and give over the plant that made it to contract production.

Today, GAZ builds the Chevrolet Aveo for General Motors (the only plant in Europe where this model is made), plus the Mercedes-Benz Sprinter van, in addition to a selection of Volkswagen and Škoda models, all in Nizhny Novgorod.

The contract with GM sees the Chevrolet Aveo sedan and hatchback series assembled on a two-shift basis. The first cars came off the line in February, and the contract will run for eight years. Planned annual output of both versions is 30,000 cars, with 45,000 possible via a potential third shift. Localisation is 30%, with the company carrying out welding, painting and assembly operations.

According to GAZ, its CKD operation for the Aveo uses 43 welding robots and 33 welding jigs developed by GM Korea. The paint shop at Nizhny Novgorod was modernised during 2012 and a line was developed and installed in the assembly shop specifically for the Aveo sedan and hatchback. The company says all technology and quality controls on the Aveo line conform to GM global manufacturing standards, with GAZ employees and specialists having been trained at GM plants in Korea and St Petersburg.

In addition to operating its highly successful contract assembly business, GAZ Group remains Russia’s largest manufacturer of commercial vehicles. The company has 13 plants, producing around 50% of the LCVs sold in the country, as well as a claimed 58% of medium-duty trucks and 65% of buses.

In April, the firm launched the GAZelle Next, its first fully new LCV model for 18 years. Drop-side truck standard and long cargo platforms were the first to go on sale, but GAZ says the series is the basis for what will eventually be a full range of light commercial vehicles with GVW of 2.8 to 5 tons.


Daimler and GAZ Group announced in December 2010 that theMercedes-Benz Sprinter delivery van would be assembled at the latter’s main LCV plant in Russia from 2011. After various delays, trial production commenced in June 2013. CKD assembly takes place in the same plant that builds GAZ’s own GAZelle LCVs. The first customer deliveries are scheduled to reach Mercedes-Benz dealerships across Russia from September.

Daimler has invested more than €100 million in the project to localize Sprinter production at Nizhny Novgorod. The van’s design had to be adapted for harsh local conditions, while funds were also needed for production processes and the Mercedes-Benz commercial vehicle distribution network. A further €90 million was invested in the project by GAZ, of which €50 million was spent on a new paint shop supplied by Germany’s Eisenmann.

Analysts believe Russia will become one of the world’s largest sales markets in the midsize and large van segments by 2020 with annual volume of around 300,000 units. Russia’s market volume for this segment today is already around 150,000 units.


Very much the quiet achiever of Russia’s contract assembly business, Avtotor continues to sign ever more deals for SKD production at its Kaliningrad base. Most recently, the company agreed an expansion of its contract with Hyundai, with the Korean brand’s most expensive model, the Equus limousine, to be added to i40 sedan build from year-end. Avtotor also assembles the BMW X1, X5 and X6 SUVs, the Chevrolet Lacetti sedan and Captiva SUV, plus the Opel Meriva and Zafira minivans as well as the Astra sedan and Antara SUV. Total capacity, spread over four plants, is in excess of 200,000 units.

Depending on the vehicle contract, activities include welding and painting, plus general assembly and testing complexes. More than 3,500 employees work for the enterprise, but if counting co-operating companies, employment is more 10,000, the company says.

In November 2012, Avtotor agreed a major new undertaking in partnership with Magna International. Once complete, this project is expected to combine new vehicle production factories and several new joint ventures for automotive components production.

Magna and Avtotor are planning to establish six fullcycle vehicle assembly operations for different automakers and up to 15 automotive components production plants in Kaliningrad. The automotive components facilities will produce parts for Avtotor’s needs, and may also supply to other Russian automotive companies as well as export parts to other countries.

The final production capacity in the new cluster is expected to increase via several phases. According to Magna, there is the potential to reach up to 250,000 vehicles per year by 2018.


Moscow-based Sollers dates from March 2002, and has various JVs to assemble and distribute Ford, Mazda, Toyota, SsangYong and Isuzu vehicles. A potential production deal with Fiat was terminated (effective January 2012) with Sollers instead agreeing what has since become a major new venture with Ford.

In October 2011, Ford and Sollers, named the Explorer SUV as the first model to be built at a plant in the Russian republic of Tatarstan. Full production commenced in April 2013, marking the first time this big SUV has been manufactured outside the US.

“With our partner Sollers, we were able to take the best practices from the Chicago Assembly Plant as well as our other SUV plants around the world, and combine them with our latest advances in the Ford Production System to ensure we achieved world-class quality and significantly reduced lead times of one to two years,” John Fleming, Ford’s executive vice president for Global Manufacturing and Labour Affairs remarked as production got underway.

The Ford Production System (FPS), which the OEM began rolling out in 2012 to its 65 plants worldwide, is said to improve flexibility, process and quality, investment efficiency and capacity utilisation. Ford says it has been able to significantly reduce investment costs and accelerate tooling and equipment installations in the Elabuga plant by using existing tool designs from its global tool shops. The implementation team visited several Ford facilities around the world to learn best practices for employing the global FPS in the Ford Sollers plant.

A month after Explorer build commenced at Elabuga, the joint venture revealed plans to add production of the EcoSport, Ford’s new global B-segment SUV, from the second half of 2014.

Three versions of Ford’s 1.6-litre aluminium Duratec petrol engine will also be made at Elabuga in Tatarstan from December 2015, the partners said in their May 2013 announcement. At 42,600m2, the powertrain facility will have an initial capacity of up to 105,000 units, with the potential for an expansion to up to 200,000. Ford says at least 30% of its Russian-built vehicles will be equipped with these engines.

The joint venture formed with Ford operates three assembly plants, and over the last 18 months has expanded from building the Focus and Mondeo in Vsevolozhsk near St Petersburg, to adding the S-MAX and Galaxy minivans, Transit van, plus the Explorer and Kuga SUVs.

Production milestones with Mazda

This year has been arguably the most important in its history for Sollers, with major JV production milestones taking place not only with Ford, but also with Mazda. The Japanese firm’s arrangement is for the contract assembler to build its models in Vladivostok, a different location to where Ford models are made. Production of the CX-5 SUV and Mazda6 sedan commenced in the first and second quarters of 2013, respectively.

The Mazda Sollers Manufacturing Rus venture has an annual production capacity of 50,000 vehicles, though this may later rise to 70,000.

On a somewhat smaller scale than either the Ford or Mazda JVs, Toyota too has an alliance with Sollers. Assembly of the Land Cruiser Prado SUV commenced in February, with the initial production capacity having been set at 1,000 vehicles a month.