Volkswagen Group Kaluga factory

Skoda close to deal on sale of Russian assets in wake of Ukraine invasion

Rapid, Octavia, Karoq and Kodiaq models were all built in Russia

Skoda has announced that it is close to completing a deal that will see all of its assets in Russia sold.

Parent company Volkswagen Group suspended exports of cars to Russia and all operations in Russia following the country’s invasion of Ukraine in March 2022. That included pausing production of the Skoda Rapid model at its Kaluga plant and ending operations at the Gaz automotive plant in Nizhny Novgorod, which had produced the Octavia, Karoq and Kodiaq models under contract since 2011.

In July 2022, VW Group additionally removed its office from Nizhny Novgorod and majority of staff took an offer to leave voluntarily, according to Skoda.

Since the suspension of operations in the region, Skoda’s employees in Kaluga have remained employed by the company and their wages were paid while Volkswagen Group monitored the situation. In January, a statement on the Skoda website read: “Intensive negotiations, which also involve the trade unions, are currently underway at the Group level.”

With no end to the war in sight, the sale of the Kaluga factory and the brand’s assets in Russia is not unexpected.

Russian Prime Minister Vladimir Putin touring the VW Kaluga plant at its opening on October 20, 2009

Speaking during the Skoda Auto Annual Press Conference this morning, Skoda CEO Klaus Zellmer said: “The Volkswagen Group has analysed various scenarios for the future of our business options in Russia. The preferred option is to sell the assets of Volkswagen Group Russia and thereby also the Kaluga plant to a third party.

“We are in the final stages of finalising the deal and are expecting to close it rather soon. However, we cannot go into detail before the deal is agreed upon with all parties.”

Russia was Skoda’s second-largest market in 2021, with a total of 90,400 vehicle deliveries in the country. Zellmer described the impact on financial results of its suspension of operations in Russia as “significant”, and highlighted the additional impact of the war on the company’s supply chain, especially regarding wiring harnesses that were produced in Ukraine.

As a result a task force team was set up to “handle the situation optimally” and VW Group has duplicated that wiring harness production at locations outside Ukraine while supporting suppliers inside the wartorn country.

Production of the Superb, Kodiaq, Karoq and the Fabia Combi is carried out by partner Eurocar at the Solomonovo plant, and Skoda said production in Western Ukraine is now almost back to normal levels.

A Skoda Superb at the Eurocar PJSC automotive plant in Solomonovo, Ukraine, 2016

“Rest assured, we are standing by our Ukrainian partners and in collaboration with them, we managed to duplicate the missing manufacturing capacity of wiring harnesses in Europe and in North Africa,” Zellmer said.

In order to secure the brand’s long-term stability, Skoda has also expanded operations in the “growth markets” of India and Vietnam.

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