Volkswagen has sold its assembly plant and other operations in Russia to a local car dealer, more than a year after the German carmaker stopped production in the country following the invasion of Ukraine, the company said. on Friday.
Under the deal requiring Russian government approval, a Moscow-based dealer named Avilon acquired the assets of Volkswagen Rus Group, the automaker said. Neither company gave a price, but Russian media, citing local records, said Avilon paid about 125 million euros ($135 million).
Volkswagen made the announcement in a brief statement, but declined to comment further on the deal.
The move makes Volkswagen the latest European carmaker to pull out of Russia over the past year, joining hundreds of other multinationals to leave a market many have spent decades building and building. build. But outrage over Moscow’s brutal war in Ukraine, combined with the difficulty of facing tough economic sanctions aimed at punishing Russia, have made the Russian market less attractive.
Last month, Mercedes-Benz announced that it had sold parts in Russia, including an assembly plant, to Avtodom, a Russian investor, almost a year after it stopped domestic production and exports. cars and trucks to Russia. The sale includes a limited buyback option, the company said, but did not provide any further details.
Last year, French car company Renault negotiated a deal with the Russian government to sell its 68% stake in AvtoVAZ, Russia’s largest car manufacturer, to a Moscow-based automotive research institute called NAMI for $1 rubles, with the option to continue doing business in the country in the future. day.
Volkswagen declined to say whether the sale included a return clause to Russia. In addition to the plant in Kaluga, a city in western Russia, the Volkswagen sale includes rental parts and company components.
Avilon, based in Moscow, did not comment on the purchase and it is not clear what their plans for the Kaluga plant are.
Before the full-scale invasion of Ukraine, Avilon sold Volkswagen cars as well as dozens of other Western brands, including Mercedes-Benz, Jeep and Rolls-Royce. Since last year, it has also started selling top Chinese brands, such as Chery, Great Wall and Zeekr.
Volkswagen spent 774 million euros to build the Kaluga plant, which opened in 2007. Two years later, Russian President Vladimir V. Putin fly in by helicopter to celebrate the full production launch of some of the company’s best-selling models, as well as models from its Skoda range.
The plant has a production capacity of 225,000 vehicles per year, roughly the same number that the company delivered to customers in Russia in 2021. Immediately after the invasion in February 2022, Volkswagen ceased operations at the plant. It also stopped making cars at another plant, in Nizhny Novgorod, owned by the Russian company Gaz Group but already used by the German carmaker.
Gaz Group sued Volkswagen over the shutdown, seeking to freeze the German company’s assets in Russia. Last month, a court ruled in favor of Volkswagen.
Over the past year, 4,000 employees of the Kaluga plant are still being paid as they wait for information about whether they will be allowed to return to work. The plant shutdown is a financial drain for Volkswagen, which is trying to expand its electric vehicle offerings and revamp its core brand. It is also struggling to stay competitive in China, the world’s largest auto market, where the German company is losing market share to local brands.
Observers believe that the big companies have waited several months to assess the situation before making a decision whether to withdraw or not. Sebastian Hoppe, a political economist at the Free University in Berlin who studies Russia, says large, multinational companies that have spent several decades building supply chains and networks realize that the complexity and accessibility of those systems make it hard for them to stop quickly.
“The more suppliers you have in Russia, the harder it is to pull out and the longer the whole process takes,” said Hoppe.
According to the country’s statistics agency, car manufacturers in Russia employed 300,000 people in 2021 and an estimated 3.5 million more work in related industries. Those jobs have been devastated over the past year, as auto production has fallen 77% largely because Western companies have decided to pull their shares and leave.
Other multinational companies are also deciding to turn their backs on Russia. Henkel, a German producer of laundry detergent and other household products, and Ikea, a Swedish furniture company, both sold their factories to local buyers in Russia earlier this year.
The sale of factories and other assets may be at a loss, but many Western companies do not expect the Russian economy to return to normal growth in the near future.
“What I think is also important, is that of course the Russian market tends to be less attractive than it was before the war,” said Hoppe.
