Despite the 'Russia Boycott,' Korean Companies Find It Inevitable to Maintain Local Operations

Minimizing Damage to Vehicles and Home Appliances

[Asia Economy Reporters Oh Hyung-gil, Yoo Hyun-seok, Kim Jin-ho] Domestic companies are closely monitoring the situation while continuing their local operations despite the suspension of their factories in Russia. Having chosen to maintain their business instead of withdrawing from Russia, they are considering ways to minimize damage to their local operations.

According to the industry on the 19th, Hyundai Motor's Saint Petersburg plant, which halted production last month, has yet to resume operations. With a decline in vehicle shipments and sales, losses are expected to be unavoidable for the time being.

According to Hyundai Motor's overseas factory sales data, the number of units shipped by the Russian production subsidiary (HMMR) last month was 3,708. This represents an 83.2% decrease compared to the same month last year (22,032 units).

Domestic sales recorded 2,970 units, down 84.6% year-on-year, while exports were 738 units, down 72.8%. These figures mostly reflect vehicles produced before the plant shutdown last month that were sold later.

In January and February alone, the Russian plant shipped 17,649 and 17,402 units respectively, but the plant shutdown from last month has had an impact.

[Image source=Yonhap News]

The automobile sales market in Russia is also contracting. According to the Association of European Businesses (AEB), total sales in the Russian market last month were 55,129 units, a 62.9% decrease compared to 148,676 units in the same month last year. Kia, ranked second in market share in Russia, sold 6,336 units last month, down 68% from 20,057 units in the previous year. Hyundai, ranked third, also saw sales drop 68% from 15,332 to 4,909 units during the same period.

Local manufacturer AvtoVAZ, ranked first in market share, saw sales fall from 33,779 to 12,289 units, a 64% decrease. Renault, ranked fourth, dropped from 11,659 to 4,072 units (65%), and Toyota, ranked fifth, plummeted from 10,278 to 3,231 units (69%).

Notably, Lexus sales plunged 91% year-on-year to 229 units last month. In contrast, Chinese automaker Chery Automobile increased its sales from 309 to 505 units, marking a 63% rise, indicating its growing penetration into the Russian market.

The prevailing view is that this trend will continue for the time being. A Hyundai Motor official stated, "We are currently monitoring the situation closely," adding, "It is not yet confirmed whether the plant will resume operations."

Samsung Electronics and LG Electronics are in a similar situation. Both companies have temporarily suspended shipments of export goods bound for Russia due to ongoing global maritime logistics disruptions. However, it is reported that they have not yet considered suspending operations at their local factories in Russia.

Products manufactured at local factories are exported not only to Russia but also to the Commonwealth of Independent States (CIS) region and Europe, so halting local production would inevitably have a negative impact on their business.

Although many global companies continue to withdraw from Russia, it is analyzed that it is realistically difficult for Korean companies to follow suit. With a high market share in Russia, withdrawing would not only reduce profits but also cede the market to Chinese companies.

Samsung Electronics and LG Electronics hold the number one position in major home appliance sectors such as washing machines and refrigerators in Russia. Samsung Electronics also commands a 30% market share in the smartphone market, double that of Apple.

This content was produced with the assistance of AI translation services.