Volkswagen AG and Russia's GAZ Group signed an agreement to assemble VW Group's VW and Skoda brand cars at the GAZ plant in Nizhny Novgorod, Russia, the German automaker says.
The two companies agreed a memorandum of understanding regarding a joint venture in Russia in February.
Under the agreement, GAZ will build the Volkswagen Jetta, Skoda Octavia and Skoda Yeti models for the Russian market. The Skoda Yeti small SUV, will be the first model to begin production by the end of 2012.
"The Russian market is a growth engine for the automobile industry and an important pillar of our Strategy 2018. The quick expansion of production capacity in cooperation with GAZ will significantly strengthen the Volkswagen Group's position on this key market," Martin Winterkorn, CEO of Volkswagen, said in a statement Tuesday.
The automaker also plans to expand its Kaluga plant in order to meet the growing demand for its cars in the Russian market. On Tuesday, VW announced that sales of its core VW brand in Russia almost doubled in May to 34,400 cars, a rise of 99.1 percent over the same period in 2010.
Nizhny Novgorod investment
Volkswagen will invest around 200 million euros in expanding and modernizing the Nizhny Novgorod plant. This includes modifications to the existing paint shop and assembly facilities and setting up a new body shop.
VW is planning to produce 110,000 vehicles per year at the plant under the agreement, which runs until 2019.