EXCLUSIVE-Hyundai not in a position to buy back Russian auto factory, source says

Hyundai sold its Russian factory after the Ukrainian invasion

Western sanctions disrupted automakers’ activities in Russia

Hyundai deal’s two-year buyback option expires in January

Hyunjoo Jin, Heejin Kim and Gleb Stolyarov

SEOUL/MOSCOW – South Korean automaker Hyundai is not in a position to buy back its old production facility in Russia due to the ongoing war in Ukraine. The buyback option will expire next month, a source familiar with the matter told Reuters.

Hyundai, along with its subsidiary Kia, was once Russia’s largest foreign automaker. However, St. It sold its facility in St. Petersburg in 2024. The facility’s operations have been suspended since March 2022, a month after Moscow invaded its smaller neighbor; This sparked a backlash from Western sanctions that disrupted supply chains and payments.

The deal, which saw Hyundai sell 100% of the plant to Russia’s AGR Automotive Group for a symbolic 140,000 won, also included a two-year buyback option. This clause expires in January.

The source, who knows Hyundai’s internal discussions but did not want to be named due to the sensitivity of the issue, said, “It is not a situation where we can buy back the shares.”

Hyundai said in a statement to Reuters that no final decision has been made yet on the buyback option. AGR Automotive Group did not respond to a request for comment.

THE CLOCK IS TIPPING FOR FOREIGN AUTOMOBILE MANUFACTURERS’ BUYBYBY OPTIONS

Although the person did not elaborate on specific reasons why the company failed to act on the buyback option, he noted the ongoing conflict in Ukraine. While US President Donald Trump has made ending the war a top priority of his administration and is pressuring Kiev and Moscow to agree to a peace deal, fighting continues and US and EU sanctions against Russia remain in place.

“The war must end,” the person said.

It was unclear whether missing the January deadline would lead to Hyundai waiving its right to buyback outright, or whether the company could potentially negotiate an extension of the option.

Many have withdrawn from the Russian market as their reputations are at stake and Western sanctions make it impossible for foreign automakers to keep their factories running. Hyundai said it will take a 287 billion won hit from the deal when it sells its assets in Russia in 2024.

Some, such as Hyundai, sold their facilities to Russian players for symbolic amounts and accepted options to buy them back within certain time periods in the hope of one day returning.

Most of these plants now produce Chinese cars under Russian brands, but Hyundai’s factory previously produced vehicles under the Solaris brand, the name of a popular model the Korean automaker produced for the Russian market. Japan’s Mazda Motor became the first company to lose its buyback rights in October when it decided not to exercise its option to buy back 50% of its Russian factory from former partner Sollers.

Renault, Ford, Nissan and Mercedes-Benz also have buyback options that expire between 2027 and 2029. Toyota and Volkswagen sold their assets without any right to repurchase.

HYUNDAI, KIA: ONCE THE DOMINANT FOREIGN CAR MANUFACTURERS OF RUSSIA

Before the company left Russia, Hyundai was based in St. Its factory in St. Petersburg was one of the largest foreign-owned automobile factories in the country, with the capacity to produce more than 200,000 Hyundai and Kia vehicles annually.

Hyundai and Kia, of which Hyundai holds approximately 35 percent shares, were the largest foreign players in the Russian market before the Ukrainian war.

Together they sold more than 400,000 cars in 2019; this accounts for about 23% of all new car sales, ahead of Russia’s largest automaker, Avtovaz. Approximately half of this volume was produced domestically at the facility in Russia. Russia’s automotive industry, once seen as one of Europe’s most promising markets, has shown weak signs of recovery this year. The market is now dominated by Chinese companies, which sell about 1 million of the total 1.57 million units sold in Russia in 2024.

This article was generated from an automated news agency feed without modifications to the text.