The Volkswagen Group’s exit from Russia has reportedly netted the German auto giant approximately €125 million ($AU204 million) – more than any automotive company to depart the country after its invasion of Ukraine.
German car giant Volkswagen has become the latest automotive manufacturer to exit Russia due to the war in Ukraine, selling its local subsidiaries and assets to a car dealer group for €125 million – equivalent to $204 million in Australian currency.
In a media statement, the Volkswagen Group – which owns brands such as Audi, Skoda, Cupra and Porsche – announced it had sold its shares in Volkswagen Group Russia to Russian car-dealer group Avilon.
The sale includes the Volkswagen Group’s Russian showrooms, parts and servicing departments, as well as the local subsidiary of its Scania truck division.
Russian news agency Interfax reports Avilon spent €125 million ($AU204 million) to buy Volkswagen’s local operations and assets, which includes factories in Kaluga and Gorky.
Volkswagen Group Russia – officially trading as Volkswagen Group Rus LLC – was established as an importer in 2003, before the Kaluga factory started assembling knock-down kits of the Volkswagen Passat and Skoda Octavia twins in 2007.
A 2010 report by German publication Auto Motor und Sport said the Volkswagen Jetta and Polo were also built in Russia for Russian customers, with the latter model receiving bespoke changes to adhere to local regulations – becoming the first VW model to be altered for an overseas market.
According to Interfax, Volkswagen’s Kaluga factory could produce up to 225,000 vehicles annually at its peak, which latterly included the VW Tiguan and Skoda Rapid.
Despite the sale to Avilon, the Volkswagen Group is understood to still be engaged in a legal battle with Russian automotive conglomerate GAZ, which was responsible for “contract assembly” of local market Skoda Octavias, Karoqs and Kodiaqs at the Gorky factory.
In April 2023, news agency Reuters reported the GAZ Group was seeking to recover 44 billion Rubles ($AU83 million) from Volkswagen across two separate lawsuits, due to the German car giant terminating its contracts with the Russian company.
If Volkswagen is able to avoid a payout to GAZ, it will be one of the most financially successful departures of any automaker which has exited Russia so far.
Since March 2022, eight major automotive companies have abandoned Russia, including Ford, Mercedes-Benz, Toyota, Honda, BMW, Nissan, Mazda and Renault.
In April 2022, Renault sold its 68 per cent stake in Russian car-maker AvtoVAZ (parent company of Lada) for just 1 ruble – equivalent to $AU0.02 at the time.
Toyota – the world’s biggest car-maker by annual sales volume – sold its Saint Petersburg factory in September 2022, announcing it would no longer import cars to Russia.
In October 2022, Nissan offloaded its shares in its Russian division to a state-owned institute for €1 ($AU1.55), which was followed by both Mercedes-Benz and Ford announcing their exits, selling their Russian operations to a local investor and joint venture partners, respectively.
Mazda followed suit a month later, selling its 50 per cent stake in Mazda-Sollers Manufacturing Rus (MSMR) to its Russian joint-venture partner Sollers for one Euro – equivalent to $1.54 in Australian currency.
While Russia’s new-car market is overall weaker following the exit of more than half a dozen auto giants, its invasion of Ukraine has inadvertently led to sales of Chinese cars soaring in the country.
As reported in March, Chinese-made cars accounted for 38 per cent of Russia’s new-car sales in January 2023 – up from just 10 per cent in January 2022 – while sales of cars imported from European countries fell from 27 to six per cent in the same 12-month period.
However, approximately 687,000 new vehicles were sold in Russia throughout 2022 – representing a 59 per cent drop on the 1.67 million sales in 2021.
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