They say that with all investments, there comes a certain level of risk. We’ll have to see just how this will apply to Russia. In what way specifically, you ask? Well, General Motors Co. (also known as GM) has recently made the official announcement that over the next five years, they will be investing approximately $1 billion into the Russian market, one that reportedly has many people within that country driving old cars, if they are even driving at all.
So, with that being the case, what is the attraction? Well, surprisingly, although some parts of Russia are quite antiquated, at the same time, it’s also one of the fastest growing car markets in the entire world.
As a matter of fact, the total number of cars that were sold in Russia just last year was 2.5 million. That is an over 40 percent rise within that time. Plus, the foreign brands of cars that are currently produced in Russia have jumped a whopping 70 percent, making the total close to one million. So, with numbers like those, GM, the company that actually ranks second in car sales in Russia, is hoping to capitalize on all of the growth by ramping up its production there.
This is actually good timing for GM being that it wasn’t too long ago that they were in serious financial trouble. After coming back from a highly-publicized bankruptcy episode, they have put their focus into expanding their company by making the moves to further develop its plant in St. Petersburg last June. GM plans to double Russia’s production by 2015, which is one of the main purposes behind such a hefty investment. Aside from expanding the plant, GM is also looking to pour into its joint venture with AvtoVAZ in Togliatti (a Russian maker of passenger vehicles). They are hoping that this partnership will aid in boosting Russia’s car production numbers to around 350,000 vehicles annually.
According the GM’s CEO, Dan Akerson, the move is practical; one that he believes will be very profitable as well, in time. Last June, Akerson stated that since Russia is presently one of the fastest growing markets for vehicle production, it makes sense that GM would build their cars where they actually sell them. Numbers don’t lie. Just in 2012 alone, GM has sold 115,755 of its vehicles in Russia. That is a 17 percent increase from 2011 (they sold 173, 484 total in 2011).
And while there are other topics that may be explored eventually, such as the making of new models and pivot points for trading, for now, it would appear that GM’s plate is pretty full. Aside from expanding the factory in St. Petersburg and the partnership with AvtoVAZ, GM’s head of international operations, Tim Lee, also stated that GM would be further developing the production of the Chevrolet Niva (a sport utility vehicle).
Yes, there is still news of a bankruptcy looming, but (and no pun intended) you still have to give GM credit for being the “little engine that could”. Besides, it seems like Russia is still a fan in spite of all of the “other press”; a fan that puts its money where its mouth is. Literally.