General Motors Corp is considering building a second vehicle at its venture with AO AvtoVAZ in Russia, revisiting plans to make the mid-sized Astra from GM's German subsidiary Adam Opel AG, writes Ryan Tutak.

GM-AvtoVAZ ZAO (GMAV) wants to start producing sedans of current Astra (code-named T3000) in September 2003 with annual volumes forecast to reach 10,000 in 2004 and 25,000 in 2005-2008. Models would be badged Chevrolet and sold only in Russia.

The project awaits approval from the European Strategy Board (ESB) of General Motors Europe AG (GME), following a presentation on 28 November 2002 to GME's portfolio strategy committee by GMAV managing director John Mylonas.

But the timing of a decision is unclear. The project, bumped from the agenda for ESB's meeting in December 2002, could gain a hearing in January 2003. It faces internal scrutiny, though backers are said to include G Richard Wagoner Jr (GM's chief executive and president as well as incoming chair) and John F Smith (GM's outgoing chair).

The car's cost is key because buying power in Russia remains weak. Since the Soviet Union collapsed in 1991: no imported new vehicle has sold over 15,000 units a year there; the country has not built even 5,000 units a year of any foreign model; and over 95% of the market is for autos below $10,000. Astra can sell for 16,500 euro to 23,500 euro ($16,630-US$23,690) in Western Europe for versions fancied by GMAV, but the venture believes it can cut the base price to 9,000 euro ($9,070), by sourcing major parts in Russia (excluding certain electronics).

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Output targets for T3000 in Russia may seem too low to localise components economically, but GM-AvtoVAZ sees creative solutions.

To stamp body parts, the venture aims to achieve profitable volumes by becoming the sole supplier of replacement panels for T3000. As this generation of Astra ceases production in Western Europe in 2004, dies and tools would be available for Russia from plants making the vehicle in Belgium, Germany and UK. Moreover, replacement panels can be priced 200%-300% higher than original pieces, and Russia offers cheap production costs, so this proposition could appeal to GME as well as GMAV.

GM-AvtoVAZ also wants to assemble engines for T3000 from kits from Opel Hungary Powertrain Ltd in Szentgotthard, Hungary (a subsidiary of Fiat-GM Powertrain BV, a 50/50 venture between Fiat Auto SpA and GM.) Annual volumes could top 50,000 (double the anticipated car output) because the 1.8-litre, 16-valve petrol motor is the same powerplant designated for export versions of GMAV's first model - Chevrolet Niva, a compact sport-utility vehicle (SUV), based on Lada Niva 2123 from AvtoVAZ.