As a result of the Ukraine war, it has been found that the market share of Chinese companies soared to 60% in the Russian market, where domestic corporations, including Hyundai Motor Company, have withdrawn. Since the local supply chain has been reorganized around friendly countries like China, there are calls for differentiated strategies when re-entering the market.
According to the 'Current Status and Implications of the Russian Automobile Industry' report published by the Korea Automobile Mobility Industry Association (KAMA) on the 1st, last year's Russian automobile production recorded 983,000 units, a 34.7% increase from the previous year. During the same period, automobile sales were tallied at 1,834,000 units, an increase of 39.2%.
Following the Ukraine war, local and Chinese corporations have filled the void left by global automakers, which left Russia. Local corporations have shown growth thanks to the expansion of subsidies from the Russian government and the recovery of domestic demand, and analyses suggest that the production increase of Great Wall Motors (GWM) and the rise in semi-knockdown (SKD) production by Geely have boosted production and sales.
In particular, the expansion of exports from Chinese corporations to Russia has played a pivotal role. China's automobile exports to Russia increased from 154,000 units in 2022 to 1.17 million units last year, a 7.6-fold increase. As a result, the market share of Chinese brands in the Russian automobile market expanded from around 8% in 2021 to 60.4% last year.
As negotiations for a ceasefire between Russia and Ukraine have accelerated recently, the possibility of global automakers re-entering the Russian market is increasing. While the market return of firms like Hyundai Motor Company, Renault, Stellantis, Volkswagen, and Toyota is being discussed, there are concerns that the reorganization of the Russian supply chain around friendly countries could pose challenges.
Previously, Hyundai Motor Company withdrew from its local operations as Western sanctions against Russia intensified. The company transferred its St. Petersburg plant for 10,000 rubles (approximately $14) in December 2023, while including a buyback clause allowing the plant to be revived within two years. By the end of this year, it must decide whether to exercise the buyback right.
Until the outbreak of the Ukraine war, the Russian market had served as a major export market and production base for the domestic automobile industry. Should domestic corporations, including Hyundai Motor Company, pursue re-entry into the Russian market, the report states that they must formulate cautious strategies that comprehensively consider geopolitical risks, expenses, policy changes, and market share.
Meanwhile, the Russian government welcomed the influx of Chinese automobiles right after the war, but is gradually tightening related regulations to protect its domestic industry. To prevent the dumping of low-priced internal combustion engine vehicles and promote technology transfer and production domestically, it is reviewing the strengthening of technology regulations and other protective measures.