Hyundai Motor plans to sell its Russian plant, which has been idle for nearly two years, to a local company for a mere 140,000 won (US$107.12). However, the contract includes a “buyback” clause, allowing Hyundai to repurchase the facility within the next two years, in anticipation of the possibility of re-entry into the Russian market.
On Dec. 19, Hyundai Motor convened an extraordinary board meeting and approved a proposal to sell its entire stake in its St. Petersburg plant, known as “Hyundai Motor Manufacturing Rus (HMMR).” The assets for sale include the St. Petersburg plant, capable of producing 230,000 units annually, and the former General Motors (GM) plant site in the same city with an annual production capacity of 100,000 units.
Although the book value of the assets to be sold amounts to approximately 287.3 billion won, the planned sale price is a mere 10,000 rubles, equivalent to about 140,000 won. The aftermath of the Ukraine war, where production and exports have come to a complete halt since March of last year, has led to the decision to sell to a local company as a measure to mitigate “risks.” The interpretation is that the company has accepted significant losses and sold at a symbolic value in order to unload the risks. The acquiring entity, Art-Finance, is a venture investment firm that has recently obtained Volkswagen’s Russian plant along with its subsidiary shares.
Earlier, Japan’s Nissan Motor and France’s Renault Group also handed over their Russian subsidiaries to local companies for a nominal fee of 1 or 2 euros, approximately 1,400 and 2,800 won, respectively. These companies also included buyback clauses in their agreements. Consequently, Financial Times has raised criticism, stating, “The Russian government is forcibly nationalizing foreign corporate assets by imposing stringent conditions such as ensuring domestic employment stability.” Hyundai Motor has also included a buyback clause within two years, but, in this case, any repurchase must be based on the market value rather than the sale price.
Hyundai Motor has decided to sell the factory after one year and nine months since the suspension of production resulting from the Russia-Ukraine war. A Hyundai Motor official said, “Considering the local situation in Russia, we plan to continue operating after-sales services (AS) for previously sold vehicles.”
The suspension of factory operations has resulted in losses accumulating like a snowball. HMMR recorded a net loss of 230.1 billion won last year, and the net loss for the first half of this year exceeded 227 billion won.