Kaluga Oblast
Kaluga's VW plant became Chery's assembly line after sale—2026 tests whether Chinese kit cars constitute real manufacturing or just branded import substitution.
Kaluga Oblast exists because Moscow's labor costs exist. When Western automakers sought Russian manufacturing locations in the 2000s, Kaluga—190 kilometers southwest of Moscow—offered proximity without capital-city wages. Volkswagen built a 225,000-vehicle-capacity plant; Peugeot, Mitsubishi, and component suppliers followed. By 2021, the oblast was Russia's automotive manufacturing center.
The sanctions that followed February 2022 tested whether industrial concentration creates resilience or vulnerability. Volkswagen furloughed the Kaluga plant in March 2022 and sold it to Russian dealer Avilon for million in May 2023. The new owners renamed it AGR Automotive and absorbed massive losses—18.8 billion rubles in 2022, 16.6 billion in 2023. GAZ Group won a 16.9 billion ruble judgment against Volkswagen in Russian courts. By September 2025, Volkswagen faced bankruptcy proceedings affecting only its remaining Russian assets.
What replaced Western production reveals the new industrial logic. In July 2024, mass production resumed at the former VW plant—not of Volkswagens, but of Chinese Chery vehicles assembled from imported kits. The 2024 revenue reached 29.4 billion rubles with 1.9 billion in net profit. Industrial robots doubled compared to the Volkswagen era, suggesting automation substitutes for departed expertise.
**By 2026**, Kaluga will test whether Chinese partnership constitutes genuine reindustrialization or merely kit assembly. The robots don't teach engineering; the kits don't build supply chains. Whether Kaluga becomes a node in Chinese automotive expansion into Eurasia or merely a final assembly point dependent on imported components, depends on whether technology transfer accompanies production transfer.