By Hyunjoo Jin, Heejin Kim and Gleb Stolyarov
SEOUL/MOSCOW, Dec 29 (Reuters) – South Korean automaker Hyundai is not in a position to repurchase its former manufacturing plant in Russia due to the continuing war in Ukraine, a source familiar with the matter told Reuters, as a buyback option appears set to expire next month.
Along with its affiliate Kia, Hyundai was once the biggest foreign carmaker in Russia. But it sold its plant in St. Petersburg in 2024. Operations at the facility had been suspended since March 2022, a month after Moscow’s invasion of its smaller neighbour, which provoked a backlash of Western sanctions that disrupted supply chains and payments.
The deal, which saw Hyundai sell 100% of the facility to Russia’s AGR Automotive Group for a symbolic 140,000 won ($97), included a two-year buyback option. That clause expires in January.
“It is not a situation where we can buy back the shares,” said the source, who is familiar with Hyundai’s internal deliberations but asked not to be named due to the sensitivity of the matter.
Hyundai told Reuters in a statement that a final decision has not yet been made on the buyback option. AGR Automotive Group did not respond to a request for comment.
CLOCK IS TICKING ON FOREIGN CARMAKERS’ BUYBACK OPTIONS
Though the person did not elaborate on the specific reasons the company could not act on the buyback option, he pointed to the ongoing conflict in Ukraine.
While U.S. President Donald Trump has made ending the war a top priority of his administration and is pressing Kyiv and Moscow to agree to a peace deal, the fighting continues and U.S. and EU sanctions against Russia remain in place.
“The war should be over,” the person said.
It was not clear if missing the January deadline would lead to Hyundai definitively renouncing its right to a buyback, or if the company could potentially negotiate an extension of the option.
With their reputations at stake and Western sanctions making it impossible for foreign carmakers to keep factories operating, most pulled out of the Russian market.
When it sold its Russian assets in 2024, Hyundai said it would take a 287-billion-won hit from the deal.
Some, like Hyundai, sold their plants to Russian players for symbolic amounts and agreed options to repurchase them within fixed timeframes in the hope of one day returning.
Most of those plants are now assembling Chinese cars under Russian brands, though Hyundai’s factory is producing vehicles under the Solaris brand, which was previously the name of a popular model produced by the Korean automaker for the Russian market.
Japan’s Mazda Motor was the first to lose its buyback rights in October when it decided not to execute its option to repurchase 50% of its Russian factory from former partner Sollers.
Renault, Ford, Nissan and Mercedes-Benz also have buyback options which expire between 2027 and 2029. Toyota and Volkswagen sold their assets without any buyback rights.
HYUNDAI, KIA: ONCE RUSSIA’S DOMINANT FOREIGN CARMAKERS
Before the company’s exit from Russia, Hyundai’s factory in St. Petersburg was one of the country’s largest foreign-owned car plants, with capacity to produce more than 200,000 Hyundai and Kia vehicles annually.
Hyundai and Kia, in which Hyundai owns a roughly 35% stake, were the biggest foreign players in the Russian market before the Ukraine war.
Together they sold more than 400,000 cars in 2019, accounting for about 23% of all new car sales and ahead of Russia’s largest carmaker Avtovaz. About half of that volume was produced domestically at its Russian plant.
Russia’s auto sector, 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 firms, which sold nearly 1 million cars in Russia in 2024 out of total sales of 1.57 million units.
($1 = 1,431.6200 won)
(Reporting by Hyunjoo Jin, Heejin Kim and Gleb Stolyarov; Editing by Guy Faulconbridge, Miyoung Kim and Joe Bavier)
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