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Ford Motor has agreed a joint venture to produce and sell cars in Russia with local producer Sollers, which has walked away from talks with Italy’s Fiat.

The memorandum of understanding on the joint venture, signed on Friday, will provide a boost to the US carmaker’s business in Russia as the country’s car market revives.

Fiat had spoken of producing as many as 500,000 vehicles a year by 2016 with Sollers when it signed a memorandum of understanding with the Russian company in February 2010. The Italian carmaker and Sollers said they had “now determined to pursue independent strategies to further develop their respective presence in Russia”.

The move comes as foreign carmaking groups scramble to shore up local production deals in Russia, ahead of the introduction of new legislation requiring them to generate more of their vehicles’ content locally and help to develop the country’s supply base. Moscow has asked carmakers to outline their plans by the end of this month.

Fiat said that it was not abandoning its ambition to sell half a million cars a year in Russia. “We are standing by that plan,” the company said, but declined to give further details on how it would achieve its target.

Ford and Sollers – formerly known as Severstal-Auto – said that their proposed joint venture would include the two companies’ local production facilities near St Petersburg and in the republic of Tatarstan.

They said that the venture would manufacture a range of Ford passenger cars and light commercial vehicles. It would also produce engines and operate a stamping facility that “will provide a higher level of local parts content for Ford vehicles built in Russia”.

They gave no figures for expected production volumes for the joint venture, which is scheduled to start operations by the end of this year.

Russia’s car market was one of the world’s fastest-growing before 2009, when the credit crisis led to car sales plummeting by 50 per cent.

Last year, the Kremlin introduced a scrappage scheme, with the onus on promoting sales of locally produced cars, marking the re-emergence of Russia as a battleground for global carmakers. In January, car sales were 72 per cent higher year-on-year at 53,562 units, according to the Association of European Businesses, a Russian trade group.

Boston Consulting Group predicts the Russian car market will regain pre-crisis levels of 3m sales per year by 2013 and overtake Germany as Europe’s largest light-vehicles market by 2018.

Ford was Russia’s 11th best-selling car brand in January compared with Fiat in 27th, according to AEB figures.

Copyright The Financial Times Limited 2017. All rights reserved.

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