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Hyundai Motor Sells Russian Plants for $100 with $220 million accounting loss

Amid Ukraine Conflict, Hyundai Exits Russian Market with Option to Reacquire Assets
South Korea
h 005380.KO Blue Chip 150
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Hyundai Motor Co., South Korea’s largest car manufacturer, has taken a drastic step in response to the ongoing conflict between Russia and Ukraine. The company announced the sale of its Russian plants for a nominal sum of about $100 to Art-Finance LLC, a subsidiary of Russian auto dealer Avilon. This move follows a trend of global automakers withdrawing from the Russian market due to the protracted war and its dampening effect on business.

The deal includes Hyundai’s entire stake in its Russian operations, comprising the St. Petersburg plant with an annual production capacity of 230,000 vehicles and an additional factory previously owned by General Motors Co., capable of producing 100,000 units. This decision comes after a year and nine months of production suspension following Russia’s invasion of Ukraine.

Hyundai’s exit from Russia represents a significant accounting loss, given the book value of 287.3 billion won ($219.6 million) for these assets. However, in a strategic move, Hyundai secured an option with the Russian government to repurchase the assets at the sale price within two years.

This arrangement mirrors that of Renault, which sold its majority stake in AvtoVAZ last year but retained a buy-back option. Hyundai’s decision was made under the weight of surging fixed costs due to the prolonged production halt, which had reportedly led to a loss of 550 billion won last year.

While Hyundai and its affiliate Kia Corp., collectively the world’s third-largest automaker, had significantly expanded their business in Russia, the sustained conflict and its economic repercussions have led to their market share plummeting to nearly zero. This departure leaves the door open for a potential return, although the challenge will be significant given the rapid market share gains by Russian and Chinese automakers in the interim.

Hyundai now contemplates redirecting its focus to other markets, with plans to potentially invest in expanding EV production at its plant in NoŇ°ovice, Czech Republic. This shift indicates a strategic reevaluation of Hyundai’s global manufacturing and market presence in light of geopolitical changes and industry trends.

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