GM had chosen to form a JV with the largest domestic car manufacturer in Russia: AvtoVAZ. Through it, GM gained access to the partner’s production facilities, supply chain, and sales network. Russia’s domestic car makers typically manufacture up to 80% of the components (versus 40% for European manufactures). Partnering with such a company could reduce time to market for new products.

GM will also be able to take advantage of their partner’s relationships with the government. Russia’s numerous government agencies are recognized for their ability to create endless red tape and demand kickbacks. A local partner could prove beneficial in overcoming bureaucratic hurdles. GM’s JV partner, however, also brings with it liabilities such as, until recently, being the largest single debtor to the state due to unpaid taxes. Also, AvtoVAZ had been the subject of an aggressive income tax evasion case by Russian tax authorities in 2000.

GM’s strategy is focused on exporting its vehicles manufactured in Russia; therefore, GM’s FDI can be considered vertical FDI. GM, like Ford, is interested in participating in Russia’s growing domestic car market and does sell a small amount of its production locally. GM, unlike Ford, attempts to both grow its market share within Russia and gain efficiencies via lower labor costs for its exports to other markets.