Auto majors Mercedes-Benz and Ford join the exodus out of Russia; keep the back door open for re-entry if the situation cools down.

While the exit has been smooth for most, some companies like Nissan have taken a hit to their books.

Autocar Pro News Desk By Autocar Pro News Desk calendar 27 Oct 2022 Views icon3593 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
 Russia’s war has stall automotive production and many foreign players are pulling out from that country

Russia’s war has stall automotive production and many foreign players are pulling out from that country

Mercedes-Benz and Ford Motors have both officially announced their exit from the Russian market on October 26. News agency Reuters reported that both companies will sell their stake in their industrial and financial services divisions to a local investor. The shares of Mercedes-Benz are being sold to vehicle dealer network Avtodom. 

As a result of the ongoing geo-political situation between Russia and Ukraine, Mercedes Benz had halted production in Russia from early March. Despite market difficulties, the German brand sold 9,558 vehicles in Russia from January to September — a 72.8 percent reduction from the comparable period of previous year, data available with Association of European Businesses (AEB)
has revealed. 

While presenting third-quarter results, Mercedes Chief Financial Officer Harald Wilhelm stated that the transaction was not expected to have substantial effects on the group's profitability and financial position beyond those announced in prior quarters.

“Final completion of the transaction is subject to the authority's approval and the implementation of contractually agreed conditions,” Wilhelm said. According to a Mercedes spokesperson, the company's 15 percent shareholding in Russian truck maker Kamaz would not be affected by the forthcoming deal and it will be passed on to Daimler Truck this year as planned. 

Meanwhile, Ford said it has finalised a deal to sell its 49 percent stake in the Russia-based Sollers Ford joint venture for a ‘nominal’ undisclosed price.
The US automaker took a $122 million writedown connected to its suspension of Russian operations earlier this year but will not take additional writedowns in connection with the Oct 26 announcement, the company said.

“Ford shares will be transferred to the Joint Venture for a nominal value,” the company said, adding that it retains the option to buy them back within a five-year period "should the global situation change.”

Ford sold around 20,000 vehicles in Russia in 2021, according to analyst estimates. It announced a suspension of its operations in Russia in March.

The reports come just days after Nissan took a $687 million setback in handing over its business in Russia to a state-owned entity for a symbolic value of one euro, matching an earlier similar move by Renault, which sold its majority ownership in Russia' s Avtovaz for one rouble.

Even as Nissan and Renault both incorporated six-year buyback clauses, Russia's Vedomosti daily, citing a source revealed that the Mercedes transaction may follow a similar set up. Russia's Avtodom said it would seek a technical partner to continue operating the production facilities at the Esipovo industrial complex northwest of Moscow, where Mercedes-Benz maintains a facility.

“The main priorities in agreeing the terms of the transaction were to maximise the fulfilment of obligations to clients from Russia both in terms of after-sales services and financial services, as well as preserving jobs of employees at the Russian divisions of the company,” Natalia Koroleva, CEO of Mercedes-Benz Rus, said in a statement.

Of the BRICS countries, while Russia is in the thick of the fire, India too has seen the exit of both General Motors and Ford Motors. At the time of going to press, reports have surfaced that South Korea’s second-largest carmaker, Kia, might become the latest OEM to shutter its operations in Russia. 

Market analysts are wondering whether India would benefit from the exit of the latest round of automotive manufacturers from Russia as the former is proving to be profitable for exports for some players like Honda, Kia Motors and Hyundai.

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