Hyundai sells its factories in Russia to Art-Finance company

Hyundai is selling two of its factories in Russia to Art-Finance, which previously acquired Volkswagen’s Russian assets. The transaction will probably take place at a symbolic cost and with a buyback condition. Before the crisis, the Hyundai plant in Sestroretsk was one of the most successful on the market and operated at full capacity, but in 2022 the company was unable to restart it due to problems with components and logistics. Now the prospects for resuming assembly are in question – Art-Finance has not yet launched the VW plant in Kaluga, purchased in May.

Hyundai Motor agreed plan to sell its stake in Hyundai Motor Manufacturing Rus (HMMR LLC) to the Russian company Art-Finance LLC. The concern’s statement clarifies that Hyundai is currently completing a deal with Art-Finance. It is noted that Hyundai will continue to provide after-sales service and other customer support in Russia.

In May, Art-Finance already acquired the assets of the Russian representative office of VW (now AGR), including an automobile plant in Kaluga. Art-Finance is owned by Andrei Pavlovich, who at that time was the president and former general director of the Avilon dealer. Now Avilon says that they have no relationship and are not part of the structure of Art-Finance LLC and AGR LLC. The AGR told Kommersant that the deal with Hyundai has only been approved, the final stage of approval is now underway. The company emphasized that Art-Finance LLC is carrying out activities to acquire the plant “completely independently.”

Hyundai owns 70% of HMMR, another 30% is owned by subsidiary Kia. In its reporting for January-September, Hyundai estimated HMMR at almost 843.8 billion won (58.5 billion rubles), while liabilities were estimated at 383.4 billion won (26.6 billion rubles).

Transaction amount, according to the South Korean agency Yonhapwill amount to a symbolic 10 thousand rubles, but Hyundai will have the opportunity to buy back within two years.

Automotive expert Vladimir Bespalov states that in the current situation, the book value of the asset does not reflect the market price.

The work of the KhMMR plant in Sestroretsk with a capacity of 200 thousand cars has been suspended since March 2022; it previously produced Hyundai Solaris, Creta and Kia Rio – some of the most popular models in the Russian Federation before the crisis. Among the reasons for the downtime, the company in its reporting indicated the refusal of a number of European and Russian suppliers to supply components and materials to the plant, as well as the refusal of the largest international companies to transport goods (components and materials) and a complete ban by the EU on the import of certain categories of auto components into the territory of the Russian Federation ( bolts, nuts, screws, oxygen sensors, torsion springs, shock absorbers, power windows, antennas and more). In addition, as noted in the document, large European suppliers stopped servicing production equipment, as well as a multiple increase in prices for automotive components.

In addition to the main site, HMMP also owns the former General Motors plant in Shushary. Hyundai acquired the site, closed since 2015, in 2020, planning to place the production of crossovers there, but did not have time to start production.

In the spring, Hyundai’s assets were claimed by Kazakh players who, according to Kommersant’s information, wanted to maintain the production of components for their assembly sites in Kazakhstan in St. Petersburg (see. “Kommersant” from April 6). However, later, according to Kommersant’s interlocutors, the Russian authorities did not allow the deal to proceed due to the alleged risks of taking the equipment out of the country. According to Interfax, Avtotor showed interest in the site. But, according to Kommersant’s interlocutors, Hyundai never seriously considered selling its assets to Avtotor.

“Russian Automobile” wrote that “Art-Finance” is allegedly negotiating with the Chinese GAC about organizing the assembly of models under their brand at HMMR. It could, in fact, be about relaunching Hyundai models from existing remnants under a foreign brand.

The companies did not confirm this information. GAC has no joint ventures with Hyundai in China and no model synergies. But Avtotor had a similar experience in completing the assembly of Hyundai / Kia models: the plant received components during this year, gradually completing the assembly of the brand’s cars on its own. It has not yet been possible to launch the VW plant in Kaluga “Art-Finance”.

It is unclear what stock of components Hyundai has in the Russian Federation and how suitable it is for producing cars, notes Sergei Udalov from Autostat. Vladimir Bespalov adds that the idea of ​​additionally releasing Hyundai models under a different brand may make sense, since this does not require adaptation of the equipment. Now the situation with logistics is better than in 2022, the question is the partners’ readiness for such a scheme. The restart of the GM site in Shushary also depends on economic feasibility, the analyst concludes. “Right now, a lot of sites have stopped, and there is a window of opportunity – if you find the right model range, you can succeed,” he says.

Olga Nikitina