Volkswagen has sold its assembly plant and other operations in Russia to a local auto dealer, more than a year after the German automaker halted production in the country following the invasion of Ukraine, the company said. announced on Friday.
Under the deal, which requires approval from the Russian government, a Moscow-based dealer named Avilon has acquired the assets of Volkswagen Group Russia, the automaker said. Neither company has disclosed the sale price, but Russian media, citing local records, reported that Avilon paid about 125 million euros ($135 million).
Volkswagen announced in a brief statement,
The company declined to comment further on the deal.
The move makes Volkswagen the latest European automaker to exit Russia in the past year, joining hundreds of other multinationals and leaving a market many have spent decades developing and building. will withdraw. But anger over the Russian government’s brutal war in Ukraine and the difficulty of dealing with harsh economic sanctions aimed at punishing Russia have made the Russian market less attractive.
Mercedes-Benz said last month that it had sold its Russian unit, including its assembly plant, to Russian investor Avtodom, about a year after halting local production and exports of cars and vans to Russia. The company said the sale included a limited repurchase option, but did not provide further details.
Last year, French automaker Renault negotiated an agreement with the Russian government to sell its 68% stake in AVTOVAZ, Russia’s largest automaker, to Moscow-based NAMI, an automotive research institute, for one ruble. bottom. I plan to do business in that country in the future.
Volkswagen declined to say whether the sale included a return to Russia clause. Volkswagen’s sale included a plant in the western Russian city of Kaluga, as well as the company’s parts and leasing divisions.
Moscow-based Avilon has not commented on the sale and it is not immediately clear what its plans are for the Kaluga plant.
Before the full-scale invasion of Ukraine began, Avilon In addition to Volkswagen vehicles, it sold dozens of Western brands such as Mercedes-Benz, Jeep, and Rolls-Royce. Since last year, it has also started selling leading Chinese brands such as Chery, Great Wall, and Zeekr.
Volkswagen built the €774 million Kaluga plant and started operations in 2007. Two years later, Russian President Vladimir V. Putin took office. flew in a helicopter To celebrate the start of full production of some of the company’s best-selling models and models of the Skoda line.
The plant has an annual capacity of 225,000 vehicles, which is close to the number of vehicles the company will deliver to customers in Russia in 2021. Shortly after the February 2022 invasion, Volkswagen shut down operations at its factories. It also stopped car production at another plant in Nizhny Novgorod that was owned by the Russian company Gaz Group and used by a German automaker.
Gaz Group has sued Volkswagen, seeking to freeze the assets of German companies in Russia over the suspension of Volkswagen sales. last month, The court ruled in favor of Volkswagen.
Over the past year, 4,000 employees at the Kaluga plant remained on the payroll as they waited for information about whether they would be allowed to return to work. The idle plant is a financial waste for Volkswagen, which is rushing to expand its electric vehicle line-up and revamp its core brand. German companies are also losing ground to local brands as they struggle to remain competitive in China, the world’s largest car market.
Officials believe the big companies waited months to assess the situation before deciding whether to pull out. Sebastian Hoppe, a political economist at the Free University of Berlin and a Russian researcher, says that large multinationals that have spent decades building their supply chains and networks are struggling because of the complexity and scope of their systems. said they found it difficult to stop quickly.
“The more suppliers there are in Russia, the harder it will be to exit and the longer this whole process will take,” Hoppe said.
Russian automakers are estimated to employ 300,000 people in 2021, with up to 3.5 million more working in related industries, according to the country’s statistics office. Those jobs have been devastated over the past year, with auto production down 77%, largely because Western companies have decided to pull their stakes and exit.
Other multinationals are also determined to turn their backs on Russia. Germany’s Henkel, which makes detergents and other household products, and Swedish furniture company Ikea sold their factories to local buyers in Russia earlier this year.
The sale of factories and other assets may have been costly, but many Western companies do not expect the Russian economy to return to normal growth in the near future.
“I also think it’s important that the Russian market tends to be less attractive than it was before the war,” Hoppe said.
