Opel will return to Russia with local production

Opel will return to Russia with local production

Opel will re-enter the Russia market this year with three models, the imported Grandland X midsize crossover and two vans that will be built at PSA Group’s factory Russia.

“Russia is a large, strategically important and attractive market with a lot of potential,” Opel CEO Michael Lohscheller said in a press release on Thursday.

Opel will start production of the midsize Zafira Life passenger van and Vivaro Transporter commercial van, which correspond to the Peugeot Expert and Citroen Jumpy, at PSA’s factory in Kaluga, south of Moscow, in the fourth quarter.

The Grandland X models sold in Russia will be built in Eisenach, Germany.

Sales in Russia will start with 15 to 20 dealers in the largest cities and Opel expects to double the size of the network in coming years.

Opel was withdrawn from Russia in 2015 by its owner at the time, General Motors, at the height of a crisis in the country’s car market caused by a sharp depreciation in the ruble. PSA bought the Opel and Vauxhall brands from GM in 2017.

Opel is expanding internationally as part of the Pace turnaround plan announced by PSA CEO Carlos Tavares in November 2017, both to increase volumes and spread risk outside of Europe, with a target of 10 percent of global sales and 20 new export markets by 2022. Opel was largely confined to Europe under General Motors to avoid cannibalizing sales from the automaker’s other brands.

New markets or initiatives already announced include an assembly plant in Namibia to sell cars in South Africa, and new importers and sales and service networks in  Lebanon, Tunisia, Morocco, Ukraine and Chile.

“Along with the Opel brand launch in Ukraine last year, we project to triple Groupe PSA brands volumes in the region by 2021, based on a profitable business and this project will strongly contribute to this target,” Yannick Bézard, PSA’s operations director for Eurasia, said in the release.

Sales of new cars in Russia are expected to rise 3.6 percent this year to 1.87 million, marking a slowdown from last year’s surge of 13 percent to 1.80 million, according to the Association of European Businesses (AEB) lobby group. Risks include the threat of new U.S. sanctions and an increase in value-added tax to 20 percent, the AEB said.

GM integrated its Russian operations into Europe from its international division in Shanghai in 2013 in a bid to help the struggling Opel, under former CEO Karl-Thomas Neumann. At the time, Chevrolet was selling more than 125,000 cars annually in Russia, and Opel was selling more than 60,000 — down from almost 100,000 five years earlier.

That initiative lasted only two years, as the Russian auto market fell sharply because of a slumping economy, weakening currency and Western sanctions over the conflict in Ukraine. In March 2015 GM announced it was exiting the market and halting production at its plant in St. Petersburg, taking a $600 million special charge in the process.

“The Russian market has developed differently from what we expected,” Neumann said at the time. “It is definitely a setback. We had to act and protect our business.”

Reuters contributed to this report

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