Volkswagen Group has signed a EUR 200m agreement to assemble a combined 110,000 Volkswagen and Škoda vehicles per year at the GAZ plant in Nizhny Novgorod. This announcement follows the February 2011 signing of an MoU for joint automobile production in Russia.

The fresh investment will allow GAZ to both expand and modernise the facility’s paint shop and assembly lines, while also installing a new body shop.

Under the latest agreement, which will run until 2019, GAZ will assemble the Volkswagen Jetta, Škoda Octavia and Škoda Yeti for the Russian market. The Yeti will be the first to be built, with the first cars due to come off the line in late 2012.

Speaking at the signing ceremony in Nizhny Novgorod Detlef Wittig, General Representative of Volkswagen Aktiengesellschaft, further noted: “…we will also be expanding capacity at our plant in Kaluga in order to participate in the boom on the Russian market.”

The collaboration with GAZ is based on an additional agreement to Decree 166 relating to customs duties benefits which was concluded with the Russian government at the end of May. Back in February, the Volkswagen Group and the GAZ Group signed a memorandum of understanding regarding joint automobile production in Russia.

Volkswagen and GAZ will be implementing a comprehensive training programme for employees in Nizhny Novgorod, ‘thus ensuring that the locally produced models meet the Volkswagen Group’s global quality standards’.

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See also: HOT TOPIC: Automakers sign up to produce more in Russia