General Motors (GM) is about to engage in a major programme to increase the localisation of the vehicles it manufactures in Russia, according to a report by the Interfax news agency. The company is looking to localise 25 suppliers of components which will serve its manufacturing facility in Shushary, St Petersburg. According to the article, the localisation drive will increase local content to the region of 60% of the vehicles that the plant manufactures.
Significance: The drive to increase localisation rates means that GM will benefit from not paying the higher import tariffs on imported vehicle components. There is a mechanism for foreign OEMS to pay less on imported tariffs, but this involves a commitment to invest in production of up to 350,000 units per annum (upa) with a local partner as a result of the latest decree 166 automotive legislation. GM appears to be covering all the bases strategically in the Russian market. As well as its drive to increase localisation at Shushary, which manufactures the Cruze among other models, GM has formed an assembly alliance with GAZ Group, while its long-established JV with AvtoVAZ to manufacture a Chevrolet-badged version of the Niva sport utility vehicle (SUV) has flourished n recent years and is also undergoing a programme of further investment. As such, there are probably few foreign OEMs better placed in Russia to meet the 350,000-upa production target that will allow lower component tariffs. GM is also planning to invest USD1 billion in the St Petersburg plant which will increase production capacity to 230,000 units per annum by 2015.
