From Volkas to VWs: oligarch's drive to make Russian cars world beaters GAZ stopped making its own cars in 2009, but next year, its partnership with Volkswagen will double production to 110,000 cars, while its plants will also produce 45,000 General Motors and Mercedes-Benz vehicles. It is also making 105,000 light and medium-duty commercial vehicles this year, including a light commercial vehicle launched by Russian prime minister Dmitry Medvedev earlier this month. Deripaska, 45, says GAZ is "no less important to Basic Element than Rusal." Yet Russian car production is still tiny compared to Germany, which is forecast by investment bank UBS to account for 44pc of western European car manufacture this year. "No one can fight with the Germans in the car industry," he says. They made reforms in their labour market and gave their support for medium-sized enterprises, innovation, and research and development - and now they benefit. This is the reality. Their quality can't be beaten. For us, it's important to have an industrial policy that will promote more components manufacture, more new material development and help us to receive better resources into the Russian market, not raw material resources but industrial resources that will help us to compete and reach our goals. Basic Element bought a controlling stake in Gorky Automobile Plant in 2000 and created GAZ Group five years later, with Mr Deripaska saying Russia needed a strong manufacturing industry that is competitive globally. Mr Deripaska believes a nation's automotive industry services are a key indicator of economic maturity, with only the most advanced counties able to create their own automotive sector. "You have to have a good production base," he says. In motor vehicles, it's already taken us 12 years and I think we will need another eight years to bring ourselves into a situation where we can really compete with the Germans, and more importantly with the South Koreans. On that basis, he sees GAZ as the "ultimate success story of Basic Element," despite that investment company also owning a majority stake in Rusal. A key part of GAZ's strategy is to develop partnerships with Western car groups to make use of its car-making capacity. "Our main focus is utilising our capacity," he says. We try to work with the best partners who want to develop new components, new elements and new raw materials. The aim is to bring more partners to develop products in Russia as quickly as we can. That will create more opportunities for us. GAZ has previously ventured into Britain, buying Birmingham van-maker LDV Holdings in 2006. However, it sold it three years later to Malaysian automobile manufacturer Weststar. Mr Deripaska, whose hosting of George Osborne and Lord Mandelson on his yacht in Corfu in the summer of 2008 created a political storm, isn't keen to make further moves into western Europe. "We need to be practical," he says. With the high euro and the state of the markets in Europe, it wouldn't be reasonable to go anywhere near buying something significant in Europe at this moment. Sixteen months ago, Deripaska said some European nations were operating "like socialism," spending above their means, given the tough economic climate. He does not seem to have changed his view. Deripaska grew up in Usk-Labinsk, in southern Russia. After a quantum statistics degree at Moscow State University, he bought a seat on Moscow's commodity exchange and began trading sugar, ferrous metals, copper and aluminium. That led him to become managing director of an aluminium smelter, which he rationalised and modernised. He then entered into long-term contracts to sell aluminium to customers in other countries and to offer the commodity on the London Metal Exchange. The 1990s saw the infamous "aluminium wars," when the Russian privatisation of state commodity assets led to a battle for control over factories and production worth billions of pounds of profit to those who succeeded. In 2000, Deripaska merged his Sibirsky Aluminium company with Millhouse Capital, which was controlled by Roman Abramovich, to form Rusal. Seven years later, Rusal was merged with Russia's SUAL company and the alumina assets of mining giant Glencore to become the world's largest aluminium producer. Now he wants action on the Russian economy, where he complains of high interest rates, a very high cost of capital and a 30-year lack of innovation and investment. "We're still in transition," he says. Twenty-two years ago, Russia was part of the Soviet Union and we were starting to build. We didn't think in those days about democracy. Russia was full of expectation that capital is great, the opposite of the socialist way, and that we were developing a more prosperous society that would give more opportunity for the people. We did it with our capital, markets and our legal and tax systems. Now we face a new set of problems. In my view, the only chance we have to grow is to promote the market economy. In today's Russia, argues Deripaska, two-thirds of the people still depend on the state. "We have major companies that are state-born," he says. We have state governance and resources and state privileges and many state things which are unnecessary. I think we need to spend another 25-30 years to develop small, medium-sized private businesses and properly-trained blue- and white-collar people. Growth in the small and medium-sized sector is the only chance to create an environment in which to grow a new Russia, but we have to be patient for another 25-30 years. I can't see any progress before that. There's no recipe. We have no easy solution for issues such as communication and transportation. And we need transparency, corporate governance, social policy openness and a clear strategy. It's not easy to achieve.