Hyundai Motor’s Steady Investment in Russia Likely to Come to Fruition

Hyundai Motor Chairman Chung Mong-koo has continuously made investment in Russia regardless of unfavorable business conditions as he has kept saying that the company will have an opportunity in the Russian market again. His perseverance seems to come out with a result.

According to a report titled “Possibility of Russian Economic Recovery and Its Effects on Automobile Market“ released by the Global Management Research Institute of Hyundai Motor Group on November 17, the Russian auto market will hit a growth trend from next year due to the stabilization of currency, oil prices rebounding and political effects at home and abroad.

Unlike an earlier rosy prediction that Russia would become the world’s fifth largest car market, there had been a downturn in the market from 2013 owing to economic depression and low oil prices. Since then, the Russian market had seen a decrease in sales for three years in a row until 2015, pushed down to the 12th biggest market in the world. The market still sees its sales go down this year but the drop in sales from January to August decreased by 14.9 percent compared to the same period last year. Moreover, the downward trend will hit a low this year for the last time, according to the report.

Now, there are a series of positive indicators, such as stabilizing international oil prices at some US$50 (59,025 won) per barrel, up 40 percent from early this year, increase in real wages at the second half of the year and stabilizing Russian ruble. Moreover, the fact that Donald Trump, who has shown a friendly gesture to Russian President Vladimir Putin, was elected as the next U.S. President is another factor to raise the expectations that the Russian economy would recover in the future.

In addition, the Russian government has injected 46.8 billion ruble (US$721.92 million or 852.23 billion won) into promoting sales of new cars this year alone. Putin has directly directed to establish “Auto Industry Strategy 2025” and abolished import duties on electric vehicles for a year from this September, seeking to come up with policies to advance the market. About 40.5 percent of registered cars in Russia as of this year are old cars that are more than 15 years old, and it is another indicator that can increase the demand with the economic recovery from next year.

Last year, GM, PSA Peugeot-Citroen, Volkswagen and Mitsubishi temporarily shut down their plants in Russia. However, Hyundai Motor has continuously released new cars and expanded production in the market.

In fact, Hyundai Motor and its smaller affiliate Kia Motors have a combined cumulative market share of over 20 percent as of September this year despite the decrease in overall market sales in Russia, and the Hyundai Solaris compact passenger vehicle and the Kia Rio subcompact sedan ranked first and third in terms of sales in the Russian market.

If the current trend continues, Hyundai-Kia Motors can strengthen its position in the market further and boost sales when the Russian car market hit a growth trend. As the sports utility vehicles (SUV) market in Russia is expected to account for 40 percent of the total car market soon, the group has announced its plan to launch small SUV models. It is also preparing to push into the eco-friendly and high-end market with the IONIQ and Genesis.