Volkswagen has sold its assembly plant and other operations in Russia to a local car dealer, more than a year after the German carmaker halted production in the country following the invasion of Ukraine, the company said on Friday. .
Under the deal, which requires approval from the Russian government, a Moscow-based dealership called Avilon acquired the assets of Volkswagen Group Rus, the car maker. Neither company specified a sale price, but Russian media citing local records said Avilon paid about 125 million euros ($135 million).
Volkswagen made the announcement in a brief statement, but declined to comment further on the deal.
The move makes Volkswagen the latest European carmaker to withdraw from Russia last year, joining several hundred other multinational corporations that have left a market where many have spent decades in curry and construct. But anger over Moscow’s brutal war in Ukraine, coupled with difficulties in coping with tough economic sanctions aimed at punishing Russia, has made the Russian market less attractive.
Mercedes-Benz announced last month that it was selling its Russian division, including an assembly plant, to Avtodom, a Russian investor, nearly a year after suspending local production and the export of cars and vans in Russia. The sale includes a limited repurchase option, the company said, but did not provide any additional details.
Last year, French automaker Renault negotiated a deal with the Russian government to sell its 68 percent stake in AvtoVAZ, Russia’s largest carmaker, to a Moscow-based automotive research institute known as NAMI at the price of 1 ruble, with the option to continue. 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 sales include the company’s components and rental divisions.
Avilon, based in Moscow, did not comment on the sale and it was not immediately clear what its plans were for the Kaluga plant.
Before the full-scale invasion of Ukraine, Avilon sold Volkswagen vehicles as well as many other Western brands, including Mercedes-Benz, Jeep and Rolls-Royce. Since last year, it has also started selling leading brands in China, such as Chery, Great Wall and Zeekr.
Volkswagen spent €774 million to build the Kaluga plant, which opened in 2007. Two years later, Russian President Vladimir V. Putin flew in a helicopter to celebrate the launch of full production of the -several best-selling models of the company, as well as models from the Skoda line.
The plant has the capacity to produce 225,000 cars a year, roughly the number of cars the company will deliver to Russian customers by 2021. Shortly after the invasion in February 2022, Volkswagen stopped operations at plant. It also stopped making cars at another plant, in Nizhny Novgorod, owned by the Russian company Gaz Group but used by the German carmaker.
Gaz Group is suing Volkswagen over the freeze, seeking to freeze the German company’s assets in Russia. Last month, a court ruled in favor of Volkswagen.
Last year, 4,000 employees at the Kaluga plant remained on the payroll while they waited for information on whether they would be allowed to return to work. The idle plant is a financial drain on Volkswagen, which is scrambling to expand its electric vehicle offerings and reinvent its core brand. It is also struggling to stay competitive in China, the world’s largest auto market, where the German company is losing ground to local brands.
Observers believe that major companies are waiting several months to gauge the situation before making their decision on whether to withdraw. Large, multinational companies that have spent decades building supply chains and networks are realizing that the complexity and reach of those systems make it difficult to stop them, said Sebastian Hoppe, a political economist at Berlin’s Free University researching Russia.
“The more suppliers you have in Russia itself, the harder it is to get and the longer this whole process takes,” said Mr. Hoppe.
Russian carmakers will employ 300,000 people in 2021 according to the country’s statistics agency, and up to 3.5 million more are estimated to work in related industries. Those jobs were destroyed last year, as car production fell by 77 percent in large part because Western companies decided to pull up stakes and leave.
Other multinational companies have also decided to abandon Russia. Henkel, a German maker of washing powder and other household products and Ikea, the Swedish furniture company, both sold their factories to local buyers in Russia earlier this year.
Sales of factories and other assets may have been lost, 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, of course is the case that the Russian market is probably less attractive than it was before the war,” said Mr. Hoppe.