Hyundai Motor set to exit Russia with St. Petersburg plant sale to AGR

South Korea’s top automaker Hyundai Motor Co. is reportedly exiting Russia by selling its car manufacturing plant in St. Petersburg to AGR Automotive Group – the latest global carmaker to fall victim to the protracted war between Russia and Ukraine.

AGR, formerly Volkswagen Group Rus, will acquire the plant, Hyundai Motor Manufacturing Rus (HMMR), according to Russian Telegram channel Avtopotok and industry sources on Wednesday.

Specific transaction terms and the deal’s value will be announced by the end of this month, sources said.

Hyundai Motor declined to confirm the Avtopotok report. The company earlier said it was reviewing various options for its Russian operations as it faced an uphill battle in competition with local carmakers in the country.

In May, Volkswagen withdrew from Russia after selling its Russian assets to an affiliate of Avilon, a local automobile dealership group, which owns AGR.

Industry officials said AGR beat other automakers such as Oblast-based Russian carmaker Avtotor and China’s Chery Automobile Corp. to acquire the Hyundai plant.

Avilon already has a business relationship with Hyundai as the Russian company does sales promotion for Hyundai’s electric crossover IONIQ 5 in the country. It also handles the import and distribution of Hyundai’s volume models such as the Solaris compact sedan, known as the Accent in Korea, and the Hyundai Custo multi-utility vehicle.

BETWEEN ROCK AND HARD PLACE

Hyundai Motor Group, which also owns Kia Corp., has invested heavily in Russia for years but has been caught between a rock and a hard place of late deciding whether to continue its presence there or cut its losses and get out.

Hyundai Motor built the St. Petersburg factory in 2010 with an annual production capacity of 230,000 vehicles, largely SUVs such as the Tucson and the Palisade.

With the protracted Russia-Ukraine crisis, however, HMMR halted its St. Petersburg factory operations in March 2022 as the war disrupted or entirely suspended imports of automotive parts into Russia.

Other global automakers, feeling the pinch, have already withdrawn from the Russian market.

Besides Volkswagen, French auto giant Renault SA, German carmaker BMW and Japan’s Toyota have pulled out of Russia since the outbreak of the war last year.

Industry watchers said Hyundai once wanted to hold out in Russia but changed its mind as its sales plummeted there due to Russia's protracted war with Ukraine.

According to the Association of European Businesses (AEB), Hyundai sold just six vehicles in Russia in August, down 99.9% from 2,892 units a year earlier.

In the first eight months of this year, HMMR secured a 0.4% market share with sales of 1,605 vehicles – down 96.5% from 46,063 units in the year-earlier period, AEB data showed.

Write to Nan-Sae Bin at binthere@hankyung.com

In-Soo Nam edited this article.