Telegram channels began to write about the departure of KIA and Hyundai from Russia. What is happening to these brands now, what will happen to local production, spare parts and service? And why companies might come back after two years
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Today, information has appeared in Telegram channels and the media about the complete and final departure of the Korean automobile brands KIA and Hyundai from Russia. Mash was the first to publish such a message, saying that companies are trying to “liquidate cars from warehouses” and their dealers are switching to Chinese brands. At the same time, the popular and previously inexpensive models Solaris, Elantra, Sonata can no longer be found in showrooms. Let’s figure out what’s happening with brands and whether they can return to Russia in the future.
What is happening with KIA and Hyundai in Russia right now
Hyundai and Kia in Russia have not made official statements about the cessation of activities in the domestic market since the freeze of production in 2022.
Hyundai in Russia has its own plant in St. Petersburg, where they produced the Hyundai Creta, Hyundai Solaris and Kia Rio. In 2021, the company sold 167,331 cars in Russia, which is 3% more than in 2020 (163,244 cars). The share of brand sales on the Russian market was 10%, which corresponded to the level of 2020. The company had 194 dealerships.
As for Kia, the brand produced its models at the Avtotor plant in Kaliningrad. In particular, they produced the Kia Soul and Kia Seltos crossovers and the Kia Cerato sedan.
The Kia Rio model was produced at the Hyundai plant in St. Petersburg. In 2021, the company sold 205,801 units in Russia, taking a market share of 12.3%. The brand’s bestsellers were the Rio, K5 and Sportage models.
Photo: Avtotor
In 2022, Avtotor stated that it was ready to resume cooperation with Hyundai and Kia on car assembly, but both brands continued to be in a “frozen” state.
As a result, Avtotor began assembling new Chinese models.
As for the Hyundai plant, on September 25, 2023, the head of the Ministry of Industry and Trade Denis Manturov announced that a Russian buyer had been found for the enterprise. “We have already made all our decisions regarding the acquisition of Hyundai. At least what was stated directly by the company itself. Therefore, a decision will be made soon. The buyer will be a domestic company,” Manturov said.
The sale will take place with a right of repurchase, which is limited to two years.
According to dealers, after production stopped, the manufacturer had car kits left in its warehouses, from which several thousand cars could still be made, but for political reasons the brands decided not to do this.
Photo: Alexander Demyanchuk / TASS
What happens to service and warranty for KIA and Hyundai
The head of the Russian Automobile Dealers Association (ROAD), Vyacheslav Zhigalov, told Autonews.ru that local importers of KIA and Hyundai support dealers and, if possible, provide them with spare parts for service and warranty service. However, he admitted that the more often information appears in major media that automakers continue to support Russian drivers and maintain a presence in Russia, the more difficult to access the channels for the supply of spare parts become.
“Korean brands try to support dealers, but the more information about this, the more difficult it is to work. When servicing and repairing cars, all dealers do their best. For example, with minor repairs and maintenance with the replacement of consumables and original spare parts, there are no problems: they are all in stock at dealers. But if questions arise regarding warranty repairs, they need to be agreed upon with the manufacturer, and this is not easy now,” Zhigalov shared.
According to him, the most difficult thing to carry out is body repairs, as well as repairs of units – previously, manufacturers simply prescribed their replacement. Now, when it is becoming more and more difficult and expensive to obtain such spare parts, restoration repairs come to the rescue. That is, dealers, with the help of professional companies, restore damaged original electronic components, engines, and gearboxes.
“Of course, parallel import also helps, but it is difficult to quickly import electronics through it. But in general, the situation with servicing KIA and Hyundai now is no different from any other European or Japanese brands,” Zhigalov noted.
Will Hyundai and KIA return in two years?
According to the head of ROAD, Russia still remains one of the largest European markets for the sale of new cars, and Hyundai and KIA had good positions here, which they, of course, will try to return when such an opportunity arises.
“Hyundai and KIA, members of a single holding, invested huge amounts of money in Russia, Hyundai significantly expanded the capacity of its plant right in February 2022, KIA had big plans for Kaliningrad,” Zhigalov noted. “But Hyundai’s option is limited to two years. We need to see who will occupy these capacities for two years. After all, during this time a new investor simply will not be able to recoup his investments. It is possible that we do not know all the terms of the transaction, which in fact may represent a profitable business model for the new owner of the plant.”
At the same time, the expert believes that foreign brands will fully begin to return to Russia no earlier than in five years. By that time, according to his forecast, up to 90% of the passenger car market will be occupied by Chinese manufacturers. And it will become extremely difficult for those who have returned, including Hyundai and KIA, to regain their positions.
“The dealer network will be reformatted, everyone will have Chinese brands in their portfolio. Clients in all segments will switch to the “Chinese”. Moreover, during this time China will go far ahead – they are developing very quickly in terms of technology. Therefore, returns for brands will be prohibitively expensive. The dealer network will need to be restored again, to bring back customers who already drive other cars,” Zhigalov is sure.
However, he acknowledged that a lot could change politically. He recalled that the Russian authorities have long begun to strictly regulate the Russian car market by subsidizing those brands that localize production in Russia and setting up customs barriers for those who do not.
Photo: Avtotor
In turn, Sergei Burgazliev, an independent consultant in the automotive industry, believes that by selling its assets, Hyundai will not be able to return to Russia as an independent automaker in the medium term.
“If I were Hyundai, I would consider options to maintain contact with the new owners of the plant in some capacity, for example, as a supplier of vehicle kits or components, in a white label format (without a brand). Hyundai is extremely reluctant to sell such an asset. But everyone understands that the South Korean government is under unprecedented influence and this is reflected in the economic activity of Korean companies,” Burgazliev said.
He also believes that in the future it will be difficult for Koreans to compete with Chinese manufacturers.
“However, given the many years of experience of the Hyundai and KIA brands in Russia, they have a chance to create a certain demand for their cars if they return. It should be taken into account that Chinese companies have made a very big step forward over the past 2-3 years,” the expert said.
In conclusion, he noted that he does not yet see any prerequisites for Hyundai to have time to use the buyback option.
2023-10-04 16:27:20
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