GAZ Plans $1Bln Auto Joint Venture

ria-novostiPutin looking at a Volga Siber before taking a test drive at the Gorky Car assembly plant in Nizhny Novgorod on Friday.
GAZ hopes to create a $1 billion joint venture with General Motors but is also looking at Daimler as a partner in the project, GAZ executives said Friday.

The venture will produce around 300,000 cars per year, allowing GAZ and its western partner to compete with French rival Renault in Russia, said Leonid Dolgov, head of GAZ's light vehicles division.

Foreign automobile giants have been pouring into Russia with joint ventures, car factories and imports as surging personal incomes created unprecedented demand. In the first half of 2008, Russia overtook Germany to become the largest car market in Europe.

Renault's Logan has been a huge success in the small-sedan segment, and the joint venture will seek to compete with it by pricing its sedans in the $12,000 to $20,000 range.

"One needs a factory to build a car such as [Renault's] Logan. It will cost $800 million to $1 billion. [The car] will be the size of the Logan. That is what we're interested in," Dolgov said.

A partnership deal will be closed by the end of the year, he said.

GAZ chief Sergei Zanozin said the company was also actively negotiating with Daimler as a partner in the venture.

"Our position in the negotiations will be tough. The market doesn't wait," Zanozin said.

GAZ, controlled by billionaire Oleg Deripaska, has a deal with Chrysler to produce a version of the U.S. auto giant's Sebring model, which will be called Volga Siber on the Russian market.

Prime Minister Vladimir Putin test drove one of the cars at a plant in Nizhny Novgorod, news agencies reported Friday. "The suspension is a bit tough, but the car can accelerate," Putin said, Interfax reported.

Reuters, MT