Volkswagen is building a new €250m ($332m) engine plant in Kaluga to supply its vehicle assembly plant there as well as for supply to contract production of VW vehicles at the GAZ plant in Nizhny Novgorod. The carmaker has also signed a letter of intent for a new logistics centre in Moscow for aftermarket parts and accessories.

The 30,000-square-metre engine plant will have an annual capacity of 150,000 units and will make a 1.6-litre petrol engine from the EA 211 series. The planned scope of production includes cylinder blocks, cylinder heads with integrated assembly, crankshafts and the assembly of complete engines.

Local production at the engine plant is expected to begin in 2015 and will supply at least 30% of demand by 2016. The move is part of VW’s agreement with the Russian government to increase local content under Decree 166, which it signed at the end of May 2011. The engines are currently supplied from the carmaker’s European engine making plants.

A ceremony was held last week in Kaluga to mark the laying of foundations on the new plant, which is immediately adjacent to the VW assembly facility. The ceremony was attended by Russian prime minister Dmitry Medvedev as well as Anatoly Artamonov, the governor of Kaluga Oblast, and Dr. Michael Macht, member of the Board of Management of Volkswagen Aktiengesellschaft responsible for Group Production (pictured).

For the Moscow spare parts logistics centre, VW Group Rus said it has signed a letter of intent with its chosen contractor for a two-phase development that will cover approximately 70,000 square metres. A VW spokesperson said it was designed to increase the quality level of services for customers and optimise costs. Further details will be available when the contract is officially signed.

Volkswagen has been producing vehicles for the Russian market at the Kaluga plant since November 2007. Four models are made there including the VW Tiguan and Polo, as well as the Skoda Octavia and Fabia.

Last Thursday, contract production of the Skoda Yeti started at Gaz’s Nizhny Novgorod plant.

(Pictured from the left) Dr Josef Baumert, plant manager in Kaluga, Marcus Osegowitsch, general director of VW Group Rus, Dr. Michael Macht, member of the Board of Management of Volkswagen Aktiengesellschaft responsible for Group Production, Russian prime minister Dmitry Medvedev and Anatoly Artamonov, the governor of Kaluga Oblast