Volkswagen Group, the world’s largest car manufacturer, has completed the sale of its Russian business unit for €125 million ($139 million), according to the company’s financial statement for the first half of 2023. The sale involved the transfer of shares in various subsidiaries such as Volkswagen Components and Service, Scania Leasing, Scania Finance, and Scania Insurance to a local investor, Art-Finance, with the support of Russian car dealer Avilon. The completion of the deal took place on May 18.
This move comes after Volkswagen, like other major foreign car manufacturers, suspended operations in Russia last year due to sanctions imposed by Western countries over Russia’s military operation in Ukraine. The suspension of operations resulted in the closure of Volkswagen Group Rus, the company’s flagship production plant in Kaluga. The estimated value of Volkswagen’s entire business division in Russia earlier this year was reported to be around $436 million, significantly lower than the minimum value of $1.5 billion at the beginning of 2022.
The Kaluga plant, which had a maximum production capacity of 225,000 vehicles per year, was responsible for the production of popular models like the Volkswagen Tiguan, Volkswagen Polo, and Skoda Rapid. The closure of the plant incurred substantial expenses for Volkswagen. Additionally, vehicle assembly at a plant in Nizhny Novgorod belonging to a Russian commercial vehicles manufacturer was also suspended, resulting in approximately 200 Volkswagen employees being offered six months’ salary for voluntary resignation.
As part of the sale, the former Russian subsidiary of Volkswagen has changed its name to AGR Automotive Group. The sale of the Russian business unit is in line with Volkswagen’s strategy to consolidate and optimize its global operations, focusing on markets that offer greater growth potential and profitability.
Volkswagen Group’s decision to divest its Russian business unit reflects the challenges faced by foreign companies operating in Russia amid geopolitical tensions and economic uncertainties. However, despite the sale, Volkswagen remains committed to its business in the Russian market, as demonstrated by its partnership with local investor Art-Finance. This partnership is expected to facilitate Volkswagen’s future operations and growth in Russia.
The sale of Volkswagen’s Russian business unit not only affects the company itself but also has broader implications for the Russian automotive industry. This acquisition by a local investor may provide opportunities for the development and growth of the Russian automotive sector, creating a more competitive and diverse market.
In conclusion, Volkswagen Group’s sale of its Russian business unit for €125 million showcases the company’s strategic decision to divest from the Russian market. The completion of the sale to local investor Art-Finance marks a new chapter for the former Russian subsidiary, now known as AGR Automotive Group. This transaction reflects the challenges faced by foreign companies in Russia and opens up possibilities for the growth and development of the Russian automotive industry.