Volkswagen has sold its assembly plant and other operations in Russia to a local car dealership, more than a year after the German automaker halted production in the country following the invasion of Ukraine, the company said Friday.
The automaker said that under the agreement, which required approval from the Russian government, Moscow-based Avilon acquired the assets of Volkswagen Group Rus. Neither company has specified a sale price, but Russian media, citing local records, said Avilon paid around 125 million euros ($135 million).
Volkswagen announced in a brief statement, and declined to comment further on the deal.
The move makes Volkswagen the latest European automaker to pull out of Russia last year, joining several hundred other multinationals leaving a market many have spent decades creating and building. But anger over Moscow’s war in Ukraine, combined with the difficulties of dealing with tough economic sanctions aimed at punishing Russia, has made the Russian market less attractive.
Mercedes-Benz announced last month that it had sold its division in Russia, including an assembly plant, to Avtodom, the Russian investor, nearly a year after it suspended domestic manufacturing and exports of passenger cars and vans to Russia. The company said the sale included a limited buyback option, but gave no other details.
Last year, French automaker Renault negotiated a deal with the Russian government to sell its 68 percent stake in AvtoVAZ, Russia’s largest automaker, to NAMI, an automotive research institute in Moscow, for a price of 1 ruble, with an option to resume business. . in the country at a future date.
Volkswagen declined to say whether the sale included a clause to return to Russia. In addition to its plant, in Kaluga, a city in western Russia, Volkswagen’s sale included the company’s components and leasing divisions.
Avilon did not comment on the sale, and it was not immediately clear what its plans were for the Kaluga plant.
Before the massive invasion of Ukraine, Avalon It sold Volkswagen cars as well as dozens of other Western brands, including Mercedes, Jeep, and Rolls-Royce. Since last year, it has also started selling leading 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 Putin I flew by helicopter To celebrate the start of full production of many of the company’s best-selling models, as well as models from its Skoda line.
The plant was capable of producing 225,000 cars annually, which is roughly the number the company will deliver to customers in Russia in 2021. Shortly after the invasion in February 2022, Volkswagen ceased operations at the plant. It also stopped making cars at another plant, in Nizhny Novgorod, which belonged to the Russian company Gaz Group.
Gaz Group sued Volkswagen over the suspension, in an attempt to freeze the German company’s assets in Russia. Last month , A court ruled in favor of Volkswagen.
For the past year, the Kaluga plant’s 4,000 employees have remained on the payroll while they waited for information on whether they would be allowed to return to work. The idle plant has been a financial drain on Volkswagen, which is scrambling to expand its electric car offerings and revamp its core brand. It is also losing ground to domestic brands in China, the world’s largest auto market.
Observers believe that large companies waited several months to assess the situation before deciding whether to withdraw from Russia. Large multinational corporations that have spent several decades building supply chains and networks realized that the complexity and reach of these systems made them difficult to stop quickly, said Sebastian Hoppe, a political economist at the Free University of Berlin who researches Russia.
“The more suppliers you have in Russia itself, the more difficult it will be to withdraw and the longer this whole process will take,” Mr. Hobby said.
Russia’s automakers employed 300,000 people in 2021, according to Russia’s Statistical Agency, and it’s estimated that another 3.5 million work in related industries. Those jobs have been devastated over the past year, with auto production down 77 percent largely due to Western companies raising their stakes.
Other companies have also decided to turn their backs on Russia. Henkel, a German manufacturer of washing powders and other household products, and Swedish furniture company Ikea sold their factories to domestic buyers in Russia this year.
Selling 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,” Mr. Hobby said, “is that of course it is the case that the Russian market tends to be less attractive than it was before the war.”