[Exclusive] Russia Negotiates Sale of Hyundai Motor Plant to Kazakhstan

Russian Senior Official Mentions Hyundai-Kazakhstan Company Negotiations
GM Russia Plant Considering Conversion for Educational Use
Volkswagen Also Proceeding with Sale of Russia Plant

A senior Russian government official revealed that negotiations are underway for the Kazakh side to take over Hyundai Motor's factory in Russia, causing a stir. Hyundai Motor was the number one automaker in the Russian market until the outbreak of the Ukraine war. The official also mentioned plans to use the Russian GM factory, acquired by Hyundai in 2020, for industrial workforce training purposes.

Russian state news agency TASS reported this on the 27th of last month (local time), citing Kirill Soloveychik, Chairman of the St. Petersburg Committee on Industrial Policy, Innovation, and Trade. At a Federal Assembly meeting on the development of the Russian automotive industry, Chairman Soloveychik said, "Hyundai is in negotiations with Kazakhstan," adding, "At the same time, the Russian government is discussing plans to use part of the GM Russia factory (acquired by Hyundai) for industrial workforce training." In Russia's bicameral system, the Federal Assembly corresponds to the U.S. Senate.

Although there had been rumors of behind-the-scenes negotiations, this is the first time a senior Russian government official has publicly mentioned the details of the talks. Hyundai Motor owns two factories in Russia. Chairman Soloveychik did not specify whether the negotiations involve one or both factories, nor did he disclose which factory is the subject of the sale if only one is involved. Industry insiders have long considered the possibility of reselling the GM factory acquired by Hyundai to be high. However, the possibility that Hyundai might sell its existing factories and completely withdraw from the Russian market cannot be ruled out. The likely buyer in the sale negotiations is Astana Motors, Hyundai's CKD (Completely Knocked Down) joint venture partner in Kazakhstan.

Global automakers have been scaling back or exiting their Russian operations as the Russia-Ukraine war has extended beyond one year. Most companies halted operations at their Russian factories immediately after joining sanctions following the outbreak of the war. Some companies, including Renault, Nissan, Ford, and Mercedes-Benz, sold their joint venture stakes to Russian state entities at low prices, with the condition of repurchasing them after the war ends. Toyota completely liquidated its local subsidiary and wound down its business.

As most companies have exited, the world is watching what decision Hyundai Motor Group, which once held the number one market share in Russia, will make. So far, Hyundai Motor Group and Volkswagen are among the few companies that still retain assets in Russia. Hyundai owns the Saint Petersburg factory (HMMR) with an annual production capacity of 200,000 units. However, it has been closed since March last year and remains inactive. The factory employed about 2,600 workers, but layoffs began last year.

Hyundai Motor Group also acquired the GM Russia factory three years ago. They planned to invest 36 billion rubles (approximately 621 billion KRW) to remodel the factory, but the project was halted due to the war. A Hyundai Motor Group official said, "We are reviewing responses based on various scenarios."

Volkswagen Group is also negotiating the sale of its Kaluga factory in Russia. Russian daily RBC reported that Avilon Group, a Russian automobile importer, has signed a purchase agreement with Volkswagen for the Kaluga factory. Following the report, Volkswagen Group stated that no decision has been made yet. Foreign media have reported that besides Avilon Group, Russia's largest private investment company, AFK Sistema Group, is also a likely candidate for negotiations. Volkswagen Group invested over $1.1 billion (approximately 1.4366 trillion KRW) in the Kaluga factory, which has an annual production capacity of 225,000 units and employs about 4,200 people.