Hyundai Motor’s losses in Russia are snowballing as the Ukraine-Russia war has been dragging on, paralyzing the Korean automakers’ factories. In recent years, the Russian government has been nationalizing assets of foreign companies that left the country, raising the risk that Hyundai Motor will be forced to sell its Russian plant at a big loss.
According to industry sources, Russian government authorities in September will evaluate a proposal by Russian automaker Avtotop to take over the Hyundai plant.
Avtotop previously proposed a plan to Russian President Vladimir Putin last month to produce gasoline engines at the Hyundai plant in St. Petersburg.
Avtatop, which assembles cars for Chinese brands such as BAIC and SWM in Kaliningrad, a Russian offshore territory, envisions using the Hyundai plant to produce hybrid systems and engines, including electric motors, gearboxes, and power electronics. If the Russian government accepts Avtatop’s proposal, Hyundai may lose the plant to Avtatop.
The operation of Hyundai’s Russian plant has been halted since Russia’s invasion of Ukraine last year. Prior to the shutdown, the plant produced Hyundai Solaris and Creta models and Kia Rios.
The Russian plant’s total production capacity was over 200,000 units per year. In 2021, it produced 231,050 units, but last year it produced only 44,163 units. So far this year, the plant has not rolled out one single car.
The plant shutdowns are also causing Hyundai’s losses to snowball. Hyundai Motor Manufacturing Russia (HMMR) posted a net loss of 230.1 billion won in 2022. In the first half of this year, its net loss crossed 227 billion won. The shutdown has brought its total losses incurred by the Russian plant since the war to nearly 500 billion won.
There is a possibility that the Russian government may nationalize the Hyundai plant or acquire it for a symbolic amount, such as one ruble. According to local media outlets, the plant may be sold to Russian automaker Avtotop or the state-run Central Scientific Research Automobile and Automotive Engines Institute, abbreviated as NAMI.
In fact, the Russian government is in the process of forcibly nationalizing foreign company assets in the name of maintaining job security at home. Avtotop has already bought a Nissan plant in Russia for just one euro. France’s Renault has also sold its entire Russian business to a state-run Russian enterprise and the city of Moscow. Global brewer Heineken also recently sold its Russian subsidiary to Russian company Arnest for one euro.
“We are considering various options, including the sale of the Russian plant, but nothing concrete has been decided yet,” a Hyundai Motor official said.