HMG under pressure to exit from Russia amid sales plunge, part shortages

Hyundai Motor Group is under heavy pressure to follow suit of other foreign finished car makers that have exited from Russia as it is grappling with plunged car sales in the country from suspended production due to the protracted Russia-Ukraine war.

According to foreign media reports on Wednesday, finished vehicles sales in Russia totaled 410,000 units in January-August, down a whopping 60 percent from a year-ago period. Adding to that, Hyundai Motor and Kia reported a hike of 40 percent in the price of engine oil and 65 percent in brake pad prices.

Under the worsening market risk, Japanese automaker Toyota recently announced the suspension of car production from its Russian plant and shutdown of its sales network as well. Matsuda also decided to exit from Russia and started discussion with its local partner.

Renault also sold off its stake in Russia’s biggest carmaker AvtoVAZ to a local company, and Volkswagen is looking for a buyer for its Russian plant. Ford, GM, Mercedes-Benz and BMW all have suspended their production in Russia.

Hyundai Motor and Kia plugged off their plant in Russia in March but have yet to decide on an exit plan. No car has been produced from Hyundai Motor’s Russian factory since the war began early this year, but local dealers have continued business with inventory sales.

Hyundai and Kia sold a total of 99,541 vehicles in Russia from January to August this year, down 60 percent from a year earlier.

The South Korean auto conglomerate still has not decided whether to shut down its Russian operations ranging from manufacturing to marketing after it has successfully improved its brand awareness there. Hyundai Motor Group last year sold total 377,614 vehicles in Russia, taking up the second-largest share in the market after Renault. Sales in Russia also amount to 6 percent of its global shipments.

To ramp up its output from Russia, the group acquired former GM plant in 2020 and then built an engine plant. Following the massive investment in the Russian operations, Hyundai Motor’s sunk cost is estimated at hundreds of million dollars, if it decided to exit from Russia. Re-entry also is not easy.

Industry experts expect Hyundai Motor Group will continue its business for now while closely watching the war situation and market conditions.

Kia last month announced that it would release the new K9 in Russia, but production from Russia is unlikely.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]