Chinese automakers hesistant to build production sites in Russia: report
Hyundai Motor Group could seize an opportunity to return to the Russian market as Moscow looks to curb auto imports and Chinese automakers hesitate to set up local production sites, according to a report from the Korea Automotive Technology Institute released Friday.
The Russian government has been increasing its recycle fee, essentially a tariff on auto imports, since October last year, and the KATECH report noted that these hiked levies would have the biggest impact on Chinese automakers.
According to Russian automotive market analysis Autostat, China accounted for about 80 percent of Russia’s total auto imports in the first half of last year. However, Chinese auto exports to Russia in the first two months of this year amounted to half of those in the same period last year.
“The Chinese auto industry must turn to local production (in Russia) to keep its competitiveness and cope with the changed policies, but they find themselves in a predicament due to high uncertainties regarding the Russian government’s policies and market situations,” the report noted.
Russians reluctant to buy China-made cars
The KATECH report cited Autostat’s survey of about 5,600 car owners in Russia in September last year, in which 27.6 percent of respondents said they would never purchase a vehicle from a Chinese brand, while 27.5 percent said they would only buy a Chinese car if there were no alternatives.
The survey indicated that Russian customers were still reluctant to purchase vehicles from Chinese automakers despite the latter’s larger presence in the market since the beginning of the Russia-Ukraine war in Feb. 2022.
The report added that quality issues related to durability and after-sales services of China-made cars could also lead to a potential makeover of the Russian auto market in the mid- to long-term. It advised global automakers to consider options such as joint ventures or consignment as they decide whether to return to the Russian market.
Trademark moves, buyback option signal Hyundai's return
Hyundai Motor left the Russian market in December 2023 when the company sold its plant in St. Petersburg for a mere 140,000 won ($100) with a buyback option, which allows the company to get the plant back within two years of the initial sale.
The Korean automaker appears to be gearing up for reentry into Russia, where Hyundai and Kia led the market share with a combined 354,000 vehicles sold in 2021. In recent months, the company has been filing for trademark registration with the local authorities.
According to Russian outlets, Hyundai and Kia registered over 20 trademarks in the vehicles, parts and accessories categories, which were approved by Rospatent, the Russian Federal Service for Intellectual Property.
“Until (US President Donald Trump) and (Russian President Vladimir Putin) agree on a ceasefire, Hyundai Motor is getting ready to return to the Russian market,” said Kim Pil-su, an automotive engineering professor at Daelim University.
“With the Trump risks regarding (Hyundai’s) US exports, (Hyundai) needs to figure out ways to diversify their business regions. (The company) already has experience in the Russian market and Russian customers have preference for Hyundai and Kia cars. It might cost them to buy back (the Russian plant) but they are going to proceed with the buyback option to revive their Russian business."
By Kan Hyeong-woo (hwkan@heraldcorp.com)
