Business

Automakers slam brakes on Russia operations

A variety of automakers are halting operations in President Putin’s country.

With sanctions against Russia turning out to be a reality, post its decision towards military operations in Ukraine last week, many automobile manufacturers are calling off their presence in President Putin’s country.

Among the automakers who have halted production in Russia is Toyota Motor Corporation, which has said that it is stopping activity at its one and only plant in St Petersburg. The manufacturing facility in St Petersburg manufactures RAV4 and Camry models with the Russian marketplace in mind.

Joining Toyota in its decision is Daimler Truck, which has halted all of its business activities in the country. These include joint venture with Russian truck maker Kamaz, which has produced 35,000 trucks for the Russian market so far. Meanwhile, Daimler’s former parent company, Mercedes-Benz, is going ahead with its decision to offload the 15 percent stake it owns in Kamaz.

Automakers hit by logistics issues

Other major manufacturers who are calling off production facilities in Russia include Swedish truck maker AB Volvo and US behemoth Ford Motor Company. The two have called off all operations on Russian soil until further notice.

These automobile companies followed the example set by French carmaker Renault who had suspended operations at its car assembly plants in Russia. The Renault decision had come about owning to logistics issues which had brought in a major shortage in components. Renault accounts for close to 40 percent of Russia’s vehicle production.

Logistics issues may be attributed to the suspension of operations by a clutch of shipping and logistics companies of the likes MSC and Maersk. These companies had stopped container shipping to and from Russia, and the situation had resulted in automotive companies being forced to stop production as components were hard to come by.

More carmakers have decided to all a halt in operations in Russia following the military aggression the country has unleashed on its neighbour. Among them is the Hyundai Group of South Korea, which accounts for close to 230,000 cars per year at its St Petersburg facility. Besides, Hyundai holds 27.2 percent of Russia’s vehicle production. Hyundai’s car assembly plant in St Petersburg had ground to a halt this week as the supply chain continued to be affected.  However, it is likely that Hyundai might resume production by next week.

Car exports to Russia suspended

Hyundai’s closure of operations had come about not due to the sanctions but due to the supply chain disruption. For the South Korean major, Russia is a huge market and it would not want the war to affect its operations.

Mitsubishi Motors of Japan is also looking to bring in a halt in production in Russia. The car maker has a joint venture with PSA Peugeot Citroën in Russia. Mitsubishi is also reportedly stopping sales of its cars in the country.

Companies which export to Russia are also having a rethink. Toyota has put a stop on exports to Russia, while US majors General Motors and Swedish automaker Volvo Cars have also followed suit. Volkswagen has also announced a stop on car deliveries to Russia dealers until further notice. Germany’s BMW, and British Jaguar Land Rover (JLR) and Aston Martin have also halted exports to Russia.

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Sanjeev Ramachandran

A journalist with 23 years of experience, Sanjeev has worked with reputed media houses such as Business Standard, The Ne More »
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