No. 1 in Construction Equipment Market Share in Ukraine Before the War
HD Hyundai Aims to Lead Postwar Reconstruction Market
Following LG, Samsung and Hyundai Motor Also Considering Re-entry
Russia's Market Potential High, Scope of U.S. Sanctions Relief Is Key
As the possibility of Ukraine and Russia entering a ceasefire or end-of-war phase after a long three-year conflict (2022?2025) increases, South Korean companies are accelerating their moves to re-enter the local markets. Following LG Electronics' restart of its washing machine factory in Russia, HD Hyundai Group's construction machinery affiliates, HD Hyundai Infracore and HD Hyundai Construction Equipment, are reportedly rushing to re-enter the Ukrainian market. This is based on the judgment that securing these markets as early as possible is advantageous amid rising trade barriers worldwide, starting with the United States.
According to industry sources on the 26th, HD Hyundai Infracore and others have begun forecasting the demand for equipment needed after the end of the Russia-Ukraine war. Post-war reconstruction will require heavy machinery such as excavators, wheel loaders, and backhoe loaders. These companies are preparing in advance to supply equipment to Ukraine in a timely manner.
A representative from HD Hyundai Site Solutions, the intermediate holding company for HD Hyundai's construction machinery division, said, "We are currently cooperating with the Ukrainian government and local governments to support post-war damage recovery," adding, "We are prioritizing support such as establishing a local construction equipment training center to train technicians and collaborating with local stakeholders to forecast equipment demand." HD Hyundai Infracore and HD Hyundai Construction Equipment are focusing on the Ukrainian market because they held a significant influence, occupying about one-third of the local market before the war broke out. Since entering in 2004, the two companies have expanded sales and market share annually by supplying equipment tailored to the local market. They are rushing to re-enter the market to reclaim their former top position.
The first company to move in anticipation of the end of the Russia-Ukraine war was LG Electronics. Recently, it has started gradually operating some production lines at its factory in Luzha Dorokhovo, Moscow Oblast, Russia. This is a measure to revive aging production facilities that had been idle since the outbreak of the war and to consume inventory stockpiled at the factory. These factories produced washing machines and refrigerators. This can be interpreted as a warm-up operation ahead of a possible production restart. LG Electronics CEO Cho Joo-wan said regarding this, "Since the war has not yet ended, we are watching cautiously," and added, "If regulations are lifted, we may start operations and are monitoring the situation closely."
South Korean companies are looking at Russia and Ukraine because they see many opportunities to expand their markets amid a global environment where trade barriers are being raised. The market potential is also significant. According to data from the South Korean Embassy in Russia, the trade volume between South Korea and Russia was $21.14 billion (approximately 30.9679 trillion KRW) in 2022 before the war, ranking second among Asian countries after China. Particularly, South Korean passenger cars, auto parts, construction heavy equipment, synthetic resins, cosmetics, and medical devices sold well. The Ukrainian market is also an opportunity for South Korea, with market share rapidly increasing. According to KOTRA, South Korean companies exported $374.51 million (approximately 548.6 billion KRW) to Ukraine in 2023, a 72.6% increase from the previous year ($216.93 million). Ukraine reportedly shows high demand for South Korean-made automobiles, plastics, boilers, and steel products.
Other major companies are also considering opportunities to re-enter. Hyundai Motor Group, which sold its Saint Petersburg factory (HMMR) in Russia for 10,000 rubles (about 160,000 KRW) at the end of 2023, plans to decide on re-entry by the end of the year. When selling to Russian venture capital firm Art Finance, Hyundai Motor Group included a buyback clause allowing the factory to be revived within two years. Since the buyback right expires this December, there is some time before a final decision must be made.
Before the outbreak of the Ukraine war, Hyundai Motor Group had a high export ratio to Russia. According to the Korea International Trade Association, in 2021, automobiles ($2.5 billion, 25.5%) and auto parts ($1.5 billion, 15.1%) accounted for over 40% of South Korea's exports to Russia. Hyundai and Kia sold 357,000 vehicles in Russia at that time, holding a market share of 21%. A group official said regarding re-entry to Russia, "No decision has been made yet," adding, "We plan to focus on understanding global affairs and local conditions."
If Hyundai Motor Group decides to return, it is expected to be the first among global automakers to re-enter the Russian market. Automakers with factories in Russia include Hyundai, Toyota, Volkswagen, Stellantis, and Renault. Among them, only Hyundai and Stellantis are known to have included buyback clauses when selling assets.
Samsung Electronics also stated that it is "in the stage of reviewing" the restart of its Russian factory and market re-entry. Since Samsung Electronics held the number one market share in the Russian TV market before the war, it is expected to actively consider re-entering the Russian market. In 2021, Samsung Electronics' Russian subsidiary recorded sales of 361 billion rubles (approximately 6.3247 trillion KRW) in the local market. Samsung has a factory in Kaluga Oblast that produces TVs and monitors.
Jang Sang-sik, director of the Korea International Trade Association's Institute for International Trade and Commerce, explained the reason companies are considering market re-entry, saying, "In Russia's case, conditions are also in place to expand production scope linked with Eastern Europe." However, Jang added, "It is necessary to observe how much the U.S. will ease economic sanctions on Russia after the war ends, and there is concern for companies as the Russian government may take measures such as provisional seizures of factories."
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