Speculation is mounting that Hyundai Motor may follow the footsteps of Nissan, Renault, and Mazda, which withdrew from Russia under a “1 euro sale contract” that included a repurchase condition (buyback clause). Following the end of the war in Ukraine, the Russian government has suggested a buyback period within 2 years, while Hyundai Motor is proposing at least a 5-year period, leading to intense negotiations between both parties.
According to industry sources and foreign reports on Sept. 26, Denis Manturov, Russia’s Deputy Prime Minister and Minister of Industry and Trade, stated to local media at the INNOPROM industrial exhibition in Kazakhstan on Sept. 25 (local time), “All decisions regarding Hyundai’s takeover have already been made,” hinting that a resolution could be imminent.
Although Minister Manturov stated, “The acquiring company will be a domestic [Russian] enterprise,” he did not specify any particular company. The AGR Automotive Group, a Russian automobile and parts dealer, is being mentioned as a prime candidate to acquire the local assets of Hyundai’s Saint Petersburg factory. Additionally, Chinese automaker Chery has also reportedly shown interest in Hyundai’s Russian plant.
It’s understood that Hyundai intends to utilize the buyback condition post-sale, hoping to reclaim the factory once the war concludes. However, there remains uncertainty about when the Russia-Ukraine conflict will end. If Hyundai fails to repurchase the factory, its local assets could be nationalized for as little as 1 euro.
Hyundai is reportedly keeping its re-entry options open, pushing for a minimum buyback period of 5 years, whereas the Russian government is suggesting around 2 years, indicating a significant disparity between the two parties.
The Hyundai factory in Saint Petersburg, which commenced operations in 2010, has an annual production capacity of 230,000 units. When combined with a nearby factory acquired from General Motors (GM) in 2020, the capacity of Hyundai’s Russian operations reaches 330,000 units annually. Including the nearby Hyundai Mobis Russian module and parts factory, and Hyundai Wia parts factory, Hyundai’s total investment in Russia exceeds 1 trillion won.
Back in 2016, when the Russian economy was facing challenges, Chairman Chung Mong-koo had expressed his commitment, stating, “Opportunities will come back to the Russian market,” and emphasized the importance of not giving up on the Russian market. This strategic decision led to a significant expansion in sales, and by 2021 the combined market share of Hyundai and Kia in Russia had climbed to the top spot.
The Saint Petersburg plant, which had been Hyundai’s foothold for expansion into Eastern Europe, ceased operations in March of the previous year. This followed Western sanctions on Russia after its invasion of Ukraine, which hindered the supply of essential automotive components and led to the suspension of the plant. Consequently, local workforce adjustments were made. Earlier, companies like Nissan, Renault, and Mazda had transferred their local assets to the Russian government, state-owned enterprises, or local joint ventures at prices between 1-2 euros with a conditional buyback period. Relatively Russia-friendly German companies like Volkswagen and Mercedes-Benz were exceptions, selling their assets at approximately 1/15th of their value.