November 25, 2024

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Hyundai Motor Group headquarters in Gangnam-gu, Seoul (Hyundai Motor Group)

Hyundai Motor Group said Tuesday it has decided to sell its entire shares of its car manufacturing plant in Russia, which has been temporarily shut down because of Russia's invasion of Ukraine, to a Moscow-based company, ending a decadelong operation.

The carmaker’s board of directors approved selling Hyundai Motor Manufacturing Russia in St. Petersburg, along with a General Motor plant it acquired in 2020 to the Russian automotive service firm Art-Finance.

“We have reviewed various options on the sellout and thought it would be the right time,” said an official from Hyundai Motor Group.

“Among the local companies who sought to acquire the Russian plant, Art-Finance offered the best bid.”

The plant has been shut down due to Russia’s invasion of Ukraine since March of last year.

Hyundai did not disclose details of the deal and said it is currently negotiating terms with the Russian company.

Hyundai will continue to provide after-sales service for cars sold within the country, it added.

The Russian plant is the carmaker’s sixth overseas production base that started commercial operations in 2011. Its annual capacity is 200,000 units with the Hyundai Solaris and Creta and Kia’s Rio as main car models. In 2021, it produced 234,000 units and sold 373,132 units, taking up a 24 percent market share in Russia.

Hyundai Motor Group acquired GM’s Russian plant in St. Petersburg in 2020 after the US automaker decided to pull out. With the manufacturing site’s 100,000 units production capacity, Hyundai’s Russian bases were expected to produce 300,000 units annually.

After the war broke out, it only made 44,000 cars last year and none this year. The plant laid off some of the 2,500 workers and those left were on paid leave. Early this year, there were rumors about the Korean auto giant selling the manufacturing facility to a Kazakhstan company.

Following the ongoing geopolitical tensions, other global automakers such as Toyota and Volkswagen have left Russia early on after the onset of the war. Hyundai was one of the few remaining foreign car brands operating in the country.

“Hyundai Motor was doing well in the Russian market but as with China and (like the Russia-Ukraine war) market situations in communist countries can change very quickly due to political issues,” said Lee Ho-geun, a car engineering professor at Daeduk University.

“Due to such uncertainties and the matter of sustainability, (Hyundai Motor) seems to conclude that it’s not easy to continue investing there.”

Lee pointed out that despite the plant sell-off the Korean automaker cannot ignore the Russian market altogether as it still stands as a big market.

“Chinese auto companies have entered the Russian market, especially in the low-cost vehicle sector,” he said.

“It’s difficult for Hyundai Motor to compete with Chinese rivals in the cost competition. I believe focusing on premium-level brands such as Genesis and launching models with high quality are the right moves because (Russia) is a rich market.”

By Byun Hye-jin (hyejin2@heraldcorp.com), Kan Hyeong-woo (hwkan@heraldcorp.com)