Daimler’s Russian subsidiary, Mercedes-Benz Rus, has started full production of the Sprinter Classic van with GAZ at the Russian vehicle maker’s plant in Nizhny Novgorod. Production is for the domestic market in Russia.

The production is in addition to knockdown kit production of Chevrolet and Volkswagen Group vehicles at the GAZ factory. It follows news that VW has recently signed a contract with Ruscon for rail movements of kits from the port of Ust-Luga to Nizhny Novgorod.

The Daimler project follows a joint €190m ($250m) investment to launch production by the companies, as well as the upgrade of 90,000 square metres of production and logistics facilities. It is one of the largest investment projects in the Russian automotive industry in recent years, according to Daimler, and will enable local production of automotive components in Russia.

Bo Andersson, GAZ president and CEO, said the latest contract came as the result of significant improvements the company has made in product quality and model range.

“The joint project will allow us to upgrade technology and strengthen our position in the commercial vehicles market,” said Andersson in a statement. “Given that GAZ and Mercedes vehicles are focused on different consumer audiences, both companies will get the opportunity to successfully develop in their segments.”

Given the move to full production in this contract, the vehicles are subject to a quality- control check of components at each stage of production, according to Daimler regulations. Daimler quality checks are also made to finished vehicles, prior to shipment from the plant. Specialists at GAZ Group have been trained in Germany and are under the supervision of German colleagues at the plant in Nizhny Novgorod.

Impact on logistics networks
Logistics flows to GAZ plant are substantial, including 550 trucks and containers every day for its light commercial vehicle production, and another 220 containers for contract manufacturing operations at full production. A large amount of the supply chain is imported to Russia, with supplier localisation levels in Russia still low. Carmakers and supppliers are looking at multimodal and rail transport to move international freight (read more here).
This was witnessed in the recent Ruscon contract with VW, for rail movements of parts to the GAZ plant from Ust-Luga port near St Petersburg to Nizhny Novgorod to supply Volkswagen assembly at the GAZ plant. GAZ builds the VW Jetta, Skoda Octavia and Skoda Yeti models for the Russian market, following an agreement signed with the German carmaker in 2011.

The dedicated trains, carrying 54 x 40-foot containers of complete knockdown (CKD) parts, will leave the port on the Russian Baltic four times a week, taking two and a half days to reach Nizhny Novgorod. The parts are being shipped from Mexico and are arriving at Ust-Luga on a new weekly feeder service launched by Hapag-Lloyd in May this year.

“The volumes are big enough and business is sufficiently regular to justify a dedicated operation,” explained Andrey Naraevskiy, director of Liner and Business Development at Ruscon. The company expects to carry 700-800 40-foot containers a month on the service.

Ruscon, a division of Global Container Service Group, is using its own 80-foot flat cars, part of the fleet of 224 new rail cars it invested in last year to help it win more intermodal traffic (read more here).

The company already runs block trains from Ust-Luga to Nizhniy Novgorod carrying parts for General Motors (Korea) for assembly by GAZ (read more here).

“We have the equipment, the experience and the expertise to ensure that the parts arrive as scheduled at the Volkswagen assembly plant,” said Naraevskiy. “We understand how important it is that the parts arrive on time to keep the assembly lines running smoothly.”