South Korea's Hyundai Motor announced plans to build its manufacturing plant in Russia, a decision that comes amid uncertainty over Russia's invasion of Ukraine.
It is reported that the plant has been idle since it was shut down in March last year due to the outbreak of the Russia-Ukraine conflict. Hyundai Motor announced today in a statement that the company's board of directors has agreed to give a stake in its St. Petersburg manufacturing plant to the Russian company Art-Finance, and expects the deal to be completed in the first half of next year.
With the escalation of the Russia-Ukraine conflict, not only Russian companies have been hit hard, but many foreign companies are also feeling the pressure. The sanctions imposed on Russia by the European Union, the United States and other countries have led to uncertainty in the business environment, which has brought severe challenges to the operation of many companies in the Russian market.
This decision by Hyundai is in line with the current overall trend in the global automotive industry. In the wake of Russia's invasion of Ukraine, many major automakers have opted to withdraw from the Russian market to avoid political and economic risks. This trend is also reflected in the likes of Germany's Volkswach Motor and Japan's Toyota Motor Corporation, which have set up factories in Russia to adjust their global production and sales strategies.
The St. Petersburg manufacturing plant was an important facility for Hyundai Motor that opened in 2010, however, due to problems with spare parts**, the plant was forced to suspend production after the outbreak of the Russia-Ukraine conflict. This decision not only affected the company's sales in the Russian market, but also had a knock-on effect on the global ** chain. The geopolitical tensions caused by the Russia-Ukraine conflict have made Hyundai's business in the Russian market even more challenging.
Hyundai sold only about 45,000 cars in Russia for the whole of last year, well below the previous average of 200,000 units sold annually, according to the European Business Association. In August this year, Hyundai's monthly sales in Russia hit a new low, with six vehicles out. This is a clear indication that the performance of automakers in the Russian market has been seriously affected in the current climate of geopolitical tensions.
In recent decades, many international automakers have made bold attempts to expand their business in Russia with the help of an expanding economy, but many of these factories are now forced to close.
For example, earlier this year, Germany's Volkswagen and Japan's Toyota also withdrew from the Russian market at their factories in Russia.
Other examples include Nissan, the Japanese car giant, which sold its assets in Russia to France's Renault last year, and gave its assets in Russia to Russian officials for a symbolic 1 ruble**.