Hyundai Motor considers pulling out of Russia after selling plant

Hyundai Motor plant in Saint Petersburg, Russia / Courtesy of Hyundai Motor Group

By Kim Hyun-bin

Hyundai Motor is considering withdrawing from Russia after selling its plant there, where operations were halted following Russia's invasion of Ukraine in February 2022.

According to local reports, Thursday, Hyundai Motor recently decided to sell two factories in Russia and is waiting for final approval from the Russian government. However, the company allegedly seeks a precondition under which it can purchase the factory back at the time of its choosing.

"Hyundai's decision is somewhat late compared to its competitors who had already withdrawn from the market a while ago. If they put those conditions (to repurchase the plant) in the sale agreement, they will be able to repurchase at a set price,” Lee Hang-koo, a research fellow at Korea Automotive Technology Institute, said.

Hyundai was the top importer in Russia but halted production in March of last year due to the Russia-Ukraine conflict. As the procurement of core parts, such as semiconductors, was prohibited by international sanctions, factory operations were suspended and most of the 2,000 local employees left the company.

A Kazakhstan-based company is said to be acquiring the plant. It has agreed to hire local employees and is currently engaged in final negotiations for the sale.

“Hyundai's cooperative company is in Kazakhstan and I believe it is the one they are selling it to. There are two car manufacturers there, and one of them has been assembling Hyundai CKD (completely knocked down) vehicles for over 10 years,” Lee added. “If they sell [the factory] to a completely unrelated company, it will be difficult to obtain references in the future, and when negotiating the price later, they may end up selling it for a lower price."

The automaker declined to comment on the possible sale.

“We are considering all possibilities, but nothing has been confirmed,” a Hyundai Motor Group official said.

Hyundai's plant in St. Petersburg, Russia, which was built in 2010, produced 200,000 vehicles annually. On December 2020, Hyundai acquired a General Motors factory nearby and expanded its production capacity to 300,000 vehicles.

The exact sale price has not yet been confirmed, however, industry watchers believe Hyundai is expected to suffer a 1 trillion won ($745.6 million) investment losses once the sale is finalized.