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Sanctions bring Russian car industry screeching to a halt

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The Volkswagen plant in Moscow which has now shut down

The Volkswagen plant in Moscow which has now shut down

The Volkswagen plant in Moscow which has now shut down

Ilya, a manager at a Volkswagen factory in western Russia, was busy discussing plans for a company-supported family event in the spring when the war in Ukraine broke out.

Just a few months later, the plant, the jewel in the crown of Russia’s car industry, and Ilya’s workplace for nearly a decade, had shut down.

“Volkswagen’s management kept telling us they were waiting for the special operation to be over and that everything would be all right,” the 33-year-old said, taking care to use the Kremlin’s terminology rather than risking arrest.

Ilya began work at the plant after university and, in his 10 years there, he got married, took out a mortgage and paid it off. But production at the factory in Nizhny Novgorod ground to a halt after February’s invasion. He was laid off along with 200 other employees.

After 11 years and hundreds of millions of dollars in investment, sanctions spelled the end for the plant. Western sanctions have left Russia’s automotive industry in tatters. New car sales crashed by 82pc in June, compared with the same month last year.

At least 10 car factories, all foreign-owned, have suspended operations in recent months, forcing tens of thousand oton furlough.

More than 7,000 factory workers have been furloughed on two thirds of their salary in Kaluga, a city 190km south of Moscow which had been a hub for car production.

Several thousand workers at local enterprises that relied on long-term contracts with foreign car makers - from components production to cleaning services — have also been hit.

Dmitry Trudovoi, who leads a trade union for workers at foreign-owned car plants, said: “People went to multinationals to make money: If you didn’t want to work hard, you could go to a Soviet-legacy enterprise where you could work until lunchtime and then just hang around. There are no workplaces like that left now.”

Many workers are resorting to low-skilled odd jobs like a security guard or a supermarket clerk.

In Kaliningrad, local officials said they would hand out free plots of land to furloughed workers to plant vegetables but Mr Trudovoi dismissed that as a PR stunt.

A few weeks after the invasion, France’s Renault decided to sell its majority stake in Russian carmaker Avtovaz to a research institute linked to the Kremlin for a token one rouble.

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In June, Avtovaz unveiled Lada Granta Classic 2022, a new “sanction-proof” Lada, using parts only from Russia and its allies.

This means it will have no airbags or anti-emissions technology and would only pass European pollution rules dating back to 1996.

In Moscow, the City Hall announced the takeover of Renault’s plant there, and vowed to revive the Soviet-era Moskvitch brand.

But the Moscow plant can’t make a car because all the key components were imported and shipments to Russia were halted after the invasion.

“At the Moscow plant the only thing they can produce right now is probably spades and barbecue grills,” Sergei Aslanyan, a Moscow-based car expert, told the RTVi channel. 

© Telegraph Media Group 2022 Ltd

Telegraph Media Group Limited [2022]


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