Trouble is brewing in Russia as the West accuse Putin of looking to illegally invade various Eastern European and Asian countries that were part of the USSR, while Putin claims he’s merely protecting ethnic Russians. The result has been increasingly harmful to Russia’s economy, and the automotive industry is certainly not an exception.
Now, Volkswagen has announced that it is cutting back on production in the country. Production estimates for the VW factory in Kaluga has dropped by about 30,000 units. Four models are assembled at the facility: the Volkswagen Tiguan, Volkswagen Polo, Skoda Octavia, and Skoda Fabia. To help cull the production numbers, the factory has gone into a ten-day furlough.
Of course, most people would automatically suspect the crisis in the Ukraine to be the only reason for the rollback. While Opel did mention that situation when talking about the problematic nature of Russia, it said that the conflict was only adding to the negative market forces. Volkswagen has said that its main concern about the developing Russian economy is the weakness of the rouble as a currency.
Even though Volkswagen is trimming back its production efforts in Russia, it certainly doesn’t have any plans to completely pull out of the country. The company is still keeping the plan to open an engine plant and parts warehouse in Russia during 2015.
According to Reuters, foreign automakers have made a significant investment in establishing production facilities in Russia since the year 2000, to the tune of about $5 billion. Even Russian automakers are suffering in the current market, with Avtovaz saying it has slashed production of Ladas.