It is a well known fact that the Russia-Ukraine war had wide-ranging impacts on the economy of the entire world but the repercussions of the war on private companies and industries has not been widely discussed. Automobile industry is one of the many sectors affected by the war. Although the effects were noticeable in some regions, there were drastic losses in the hotspots of the war: Russia and Ukraine. This has resulted in automobile companies based in the countries taking significant losses.

Hyundai, one of the world’s leading automobile manufacturers, is one of the companies that was already hard hit by the pandemic and some other factors in Russia. They have recently announced their decision to no longer produce cars for the Russian market. The company’s decision to pull out of Russia was motivated by its goal of global restructuring which aimed at effectively making use of production capabilities and focusing more on the production of electric vehicles and other mobility solutions which would remain viable in the future.

Earlier, the Korean car manufacturer had suspended its operations in Russia citing their financial loss and unsuccessful attempts in the country. Later, they had issued a statement saying they were reconsidering their options to provide to the Russian market. As claimed by a Reuters report, Hyundai has said that they will consider their future options within Russia and further added that decision had not been taken so far.

As a company who had been functioning inside the country for over two decades, the news might change the dynamics of the Russian automobile industry. However, keeping the company’s declining sales and the need to restructure its global operations in mind, the move might turn out to be beneficial for Hyundai.

Origin Energy | Hyundai Australia

Credits: Hyundai

Hyundai’s Challenges in Russia

There are several factors which could have attributed to the company’s situation in Russia.

  1. The economic sanctions imposed on the automobile industry inside the country make it harder for international companies to run their businesses. They have led to a significant reduce in consumer demand and eventually decreased profits for the companies.
  2. The competition within the country in the automobile industry has made it difficult for Hyundai to maintain its dominance in the car market.
  3. Hyundai struggled to procure local components and often had to burn their funds unnecessarily to obtain them. Moreover, most manufacturing plants were located in remote areas of the country and led to additional transportation costs.

Hyundai’s Attempts in Russia:

Despite the challenges faced by Hyundai in the Russian market for over two decades, they have made numerous attempts to make it work for themselves. Almost a decade after starting business in the country, Hyundai had started its first manufacturing plant in Russia in hopes of providing better services to the Russians users of the brand. Over the years, the company has invested over a billion dollars expecting a breakthrough.

However, the company has finally decided to end its presence in the country. The move will allow the Korean manufacturer to focus its resources on other key markets where they have been more successful in recent years.

The Impact of Hyundai’s Exit on Russia’s Automotive Industry

Hyundai’s exit from the Russian market is likely to have a significant impact to the country’s automobile industry. The company was one of the largest foreign automakers in Russia. While, Hyundai and Kia(a Hyundai affiliated brand) held positions among the top three sellers in the country before the war, they are now being replaced by Chinese brands.

A final statement from the company has still not come out. However, the media reports from South Korea have claimed that everything is finalized, and the car manufacturer is waiting for the company’s go ahead.