To Become No. 1 Automaker In Russia
Hyundai Motor is seeking to acquire General Motors’ (GM) plant site in St. Petersburg to establish additional production lines in Russia. Currently, Hyundai has a car factory with an annual production capacity of 230,000 units in St. Petersburg.
Hyundai Motor's Russian production company (HMMR) submitted an application to a Russian anti-trust agency on July 24 (local time) to acquire the GM factory site in St. Petersburg, Hyundai Motor said on July 28. The anti-trust agency will review whether Hyundai’s acquisition of the plant site violates Russia’s anti-trust law. "We are in talks with GM to acquire the factory site," a Hyundai official said. If the acquisition is completed, Hyundai Motor is likely to build a new factory on the site.
GM invested about US$300 million (359.6 billion won) in the plant, which started operation in 2008. The plant has been suspended since 2015 as the Russian economy has been in recession due to economic sanctions from the U.S. and Europe. Prior to Hyundai Motor, some carmakers showed interest in the plant and received approval from the anti-trust agency, but no progress has been made in the acquisition process.
St. Petersburg is the hub of Russia's automobile industry where global car plants are located. Hyundai Motor and its 11 partners, including Hyundai Mobis Co. and Hyundai Hysco Co., are also based here. If Hyundai Motor acquires the GM plant site and set up new production lines, it will be able to increase the proportion of local production and lower production costs.
Hyundai Motor became a popular car brand among Russian consumers in 2014. At the time, Russia was suffering from economic sanctions by the U.S. and Europe. While its rival carmakers including GM withdrew from Russia, Hyundai Motor increased investment and launched new models. Since then, sales of Hyundai Motor and Kia Motors have been on the rise, reaching a first-half high of 198,927 units in 2018 and renewing the record with 200,692 units in 2019.
Hyundai and Kia ranked second in the Russian market in the first half of 2020 by selling 145,741 units (a market share of 22.9 percent). It came after AvtoVAZ, a local carmaker owned by France’s Renault Group which sold 237,636 units (37.4 percent). Hyundai and Kia came in first in the first quarter of 2020 before the COVID-19 outbreak began to affect the Russian economy.
Meanwhile, Hyundai Motor has a long way to go before being allowed to acquire the plant site. It needs to pass a review of the application by the Russian anti-trust agency. It is also facing competitors such as the British-Belarus joint venture Unison and Germany's BMW. Unison had already obtained permission from the anti-trust agency in 2019.