Hyundai Motor has decided to sell its factory in St. Petersburg, Russia, to a local firm for 10,000 rubles (approximately 140,000 won). The decision was approved during a special board meeting held on Dec. 19, wherein Hyundai Motor sanctioned the sale of its stake in the Russian plant to the local investment company, Art-Finance.
Currently, Hyundai Motor holds a 70% stake in the factory, with Kia owning the remaining 30%. The agreement involves transferring the ownership of both companies’ stakes. The deal, which includes the St. Petersburg plant acquired by Hyundai Motor from GM for 50 billion won in 2020, also incorporates a buyback option, allowing Hyundai Motor to reclaim ownership of the factory within two years. The book value of Hyundai’s Russian plant is approximately 410 billion won, and renegotiations will be necessary when exercising the buyback option.
The St. Petersburg plant, completed in September 2010 after Hyundai invested around 540 billion won over two years, marked Hyundai’s sixth overseas production facility at the time. The factory’s completion ceremony garnered significant anticipation even within Russia, as it was attended by President Vladimir Putin himself. The plant, with an annual production capacity of 230,000 units, manufactured popular models such as Solaris and Creta, catering to the Eastern European market, including Russia. Hyundai Motor achieved significant success, producing 234,000 vehicles in 2021 and securing the top spot in monthly market share.
However, the factory faced challenges due to the repercussions of the Ukraine war, leading to a nearly two-year suspension of operations. The decline in the value of the ruble compounded the difficulties, resulting in accumulated losses. Faced with supply chain disruptions and currency devaluation, Hyundai Motor had to consider the economic feasibility of maintaining the plant in Russia, risking a decline in its global reputation.
While the agreement includes a buyback clause within two years, the deal requires approval from the Russian government. Furthermore, renegotiations for the purchase are inevitable, posing potential financial losses for Hyundai Motor.
This divestment aligns not only with the challenges in Russia but also with Hyundai’s global strategy to strengthen its position in the United States and ASEAN markets amidst geopolitical tensions and the global shift towards electric vehicles. Hyundai Motor has been securing production bases in the U.S. and ASEAN, redirecting its focus away from traditional emerging markets like Russia and China.
This article was originally published on Dec. 19, 2023.
