Hyundai Motor in Dilemma
Major automakers including Volkswagen, Stellantis, Ford and Renault are very concerned as Russian President Vladimir Putin announced that the Russian government would nationalize foreign companies’ assets if they withdraw from Russia. Hyundai Motor Co., which enjoyed growth in the Russian market, also fell into deep trouble.
AutoForecast Solutions CEO Joe McCabe warned in an interview with Automotive News on March 24 that the Russian government is highly likely to nationalize the assets of overseas automakers that have stopped operating in Russia.
Renault announced on March 23 (local time) that it would immediately shut down its Moscow plant, blaming it on Russia’s invasion of Ukraine. The asset value of Renault's Moscow plant is about 2.2 billion euros (about 2.9 trillion won).
Renault is also considering stopping the operation of AvtoVAZ, a Russian automobile manufacturing company founded in 1966. Renault is the largest shareholder with a 69 percent stake in AvtoVAZ, which produces the Lada, the national car of Russia.
Recently, Ukrainian President Vladimir Zelensky urged French companies to withdraw from Russia in a video address to the French National Assembly and Senate.
U.S. automaker Ford earlier expressed concerns about Russia’s invasion of Ukraine and said it would immediately shut down its joint venture Ford Solus, which manufactures and sells commercial vans in Russia.
Stellantis also decided to move production of some models from Russia to Western Europe.
Mercedes-Benz also declared a halt to production in Russia, putting exports on hold. In its annual report released this month, the company worried that some 2 billion euros worth of assets in Russia could be seized by the Russian government. The assets included a plant near Moscow that opened in 2019.
Concerns are growing at Hyundai Motor, which produces more than 200,000 vehicles per year at its St. Petersburg plant. On March 24, Hyundai Motor’s Russian production subsidiary notified its employees and partners that it would indefinitely suspend production beginning from March 27 due to the collapse of the global supply chain and a shortage of parts including automotive semiconductors. However, the Korean carmaker seems to blame the shutdown on a shortage of parts rather than the Ukraine crisis.
As the Russian market accounts for 5.3 percent of Hyundai Motor Group’s global sales volume, it is difficult for the Korean automaker to withdraw from Russia. As the group is struggling in the Chinese market, if it gives up the Russian market, it is highly likely to significantly hamper its growth in emerging markets.
However, realistically, even if its factory continues to run in Russia, it is difficult to secure its desired profitability due to the depreciation of the Russian ruble. There is a high possibility that it will face a boycott among consumers in major markets such as the United States and Europe unless it withdraws from Russia.