"Everyone Is Leaving Russia"... Growing Concerns in the Auto Manufacturing Industry

Major Automakers Including Renault and Benz Gradually Withdraw
Survived Until 2014 and Succeeded... "Must Consider Post-War Period"

[Asia Economy Reporter Seong Giho] Due to the Russia-Ukraine war, Russia's automobile market is virtually at a 'standstill.' With global automakers gradually leaving Russia, only Hyundai Motor and Kia remain among the major manufacturers. Experts advise Hyundai Motor Group to 'hold on' for the time being, reflecting on the 2014 Russian economic crisis case.

On the 1st, the Association of European Businesses (AEB) recently announced that Russia's automobile sales in September were only 46,698 units. This represents a 59.6% decrease compared to the same period last year. As the invasion of Ukraine prolongs and economic sanctions intensify, both demand and supply chains are facing disruptions.

Hyundai Motor Group is also severely affected. According to Hyundai Motor Russia (HMMR), local sales in September recorded '0' units for the second consecutive month following August. Sales plummeted from 17,649 units in January this year to 3,708 units in March immediately after the war began, then dropped to 14 units in July, and finally recorded '0' units in both August and September. The cumulative sales from January to September this year also fell by more than 70% compared to the same period last year, totaling 43,634 units.

Due to the Russia-Ukraine war, global automakers are announcing their withdrawal from Russia one after another. In May, Renault, which held the number one market share in Russia, transferred 100% of its stake in the Moscow automobile plant Renault Russia to the Moscow city government and announced plans to sell its entire Russian business division for 2 rubles (about 40 won). This was a response to backlash from European consumers. Ford announced on the 26th of last month that it would sell its 49% stake in its Russian joint venture. On the same day, Mercedes-Benz also declared it would sell its stake to a local Russian dealer.

Toyota, Lexus, BMW, Nissan, WAG (Volkswagen, Porsche, Audi, ?koda), Stellantis, Jaguar Land Rover, and others have declared their withdrawal from the Russian market.

Hyundai Motor Group is effectively the only global automaker remaining in Russia. However, it is not easy for the group to give up the Russian market. Hyundai Motor Russia is one of the global major production bases alongside the US, India, and the Czech Republic, with an annual production capacity of about 250,000 units. Industry insiders believe that if Hyundai Motor Group decides to withdraw, assets worth approximately 3 trillion won and recent large-scale investments would all become 'sunk costs.'

There is also concern about the possibility of forced asset sales by the Russian government. If forced sales proceed, the group is expected to suffer significant damage because while cash on hand and liquid assets are limited, the costs to be repaid and assets to be lost are substantial. Junseong Kim, an analyst at Meritz Securities, stated, "The Russian government continues to forcibly seize local assets of global companies. There have been mentions in domestic and international media about the possibility of forced sale of Hyundai Motor's Russian plant, and a related decision is expected to be finalized as early as the fourth quarter of this year or by the first quarter of next year at the latest."

Experts point out that the current 'holding on' strategy employed by Hyundai Motor Group may be more effective than selling or withdrawing. Previously, during the 2014 Russian economic crisis, Hyundai Motor Group was the only company that endured while others withdrew. Subsequently, in August last year, it recorded the number one market share in Russia for the first time.

Professor Pilsoo Kim of the Department of Future Automotive Engineering at Daelim University said, "Since Hyundai Motor Group has experience in maintaining loyalty before, the Russian government is unlikely to proceed easily with forced sales or mergers. The war will not continue indefinitely, so now is the time to be patient to secure market dominance after the war."

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