Fiat Abandons Nizhny Novgorod Plant Plans, Seeks Alternative Locations in Russia

Strategic Insights -

Fiat's plans to set up an assembly plant in Nizhny Novgorod have been scrapped due to the company's inability to reach an agreement with GAZ. The Russian Economy Ministry had signed an agreement with Fiat in June 2011 to build 120 cars per year in Russia, with plans to invest over $1 billion in the project. However, Fiat now intends to build a plant near St. Petersburg, a location that already hosts production facilities for Nissan, Toyota, and General Motors. In the meantime, Sberbank has proposed utilizing the capacity at the Derways plant in Karachaevo-Cherkesia, which the bank acquired in 2010 in exchange for a 1 billion ruble loan.

Key Takeaways:

  • Fiat has abandoned its plans to set up an assembly plant in Nizhny Novgorod due to a failure to reach an agreement with GAZ.
  • The Russian Economy Ministry had signed an agreement with Fiat in June 2011 to build 120 cars per year in Russia, with plans to invest over $1 billion in the project.
  • Fiat now intends to build a plant near St. Petersburg, where it will join existing production facilities operated by Nissan, Toyota, and General Motors.
  • Sberbank has proposed utilizing the capacity at the Derways plant in Karachaevo-Cherkesia, acquired by the bank in 2010 for a 1 billion ruble loan.
  • The bank is in talks with Korea's Hyundai to potentially attract other companies to the Derways plant.
  • Fiat was "very interested in working with GAZ and using its production facilities" but was unable to reach an agreement due to existing deals with Volkswagen and GM.

Statistics:

  • Fiat had planned to invest over $1 billion in the Russian project.
  • The company had agreed to build 120 cars per year in Russia through its agreement with the Russian Economy Ministry.
  • Sberbank acquired 51% of Derways in 2010 in exchange for a 1 billion ruble loan.
  • The Derways plant currently assembles Chinese cars.
  • GAZ has already signed deals with Volkswagen and GM for the assembly of 110,000 and 30,000 cars per year, respectively.

Sources:

  • Kommersant newspaper
  • Interfax - Moscow
  • Sberbank (RTS: SBER)
  • GAZ (RTS: GAZA)