AutoBeta(AutoBeta.net)03/11 Report--

As time goes by, Russia and Ukraine have made no progress in negotiations and have failed to reach a cease-fire agreement. At the same time, Russia has adopted a major decision to nationalize the assets of foreign companies in Russia (the act of nationalizing property).

According to a report by the Russian media "Izvestia" ("Izvestia" is the highest Soviet newspaper in the former Soviet Union) on the 10th, Oleg Pavlov, head of Russia's "Social consumption Initiative" organization, said that the list of foreign enterprises that may be nationalized in the future has been sent to the government and the attorney general's office, listing a total of 59 foreign companies that may face nationalization due to stopping operating in Russia or withdrawing from the Russian market. Experts believe that the reality of nationalization is still difficult to say, but if necessary, these measures will certainly be introduced.

The foreign companies mentioned in the list include not only consumer and technology brands such as McDonald's, Coca-Cola, Apple, Microsoft, Ikea and Himm, but also the automotive industry, such as Volkswagen, Porsche and Toyota. Among them, Volkswagen and Toyota have local production plants. It is worth mentioning that the list is in an "open state" and more foreign companies in Russia will be included in the future.

Time goes back to March 7th, when Turchak, secretary of the general committee of the ruling party, United Russia, proposed that Russia should nationalize the assets of companies that withdraw from the Russian market. On March 9, United Russia added that the Russian Legislative Council supported a bill that would allow enterprises with more than 25% of foreigners from "unfriendly countries" to be included in the external management mechanism if they stopped operating in Russia. According to the bill, if a company that has previously announced that it has withdrawn from Russia resumes operation or sells shares within five days, it can be exempted from external management mechanism, provided that the company's business and employees are retained. If not, the court will set up a three-month interim management team, and the company's assets will be auctioned or liquidated.

Since February 24, 2022, a number of car companies around the world have announced their withdrawal or suspension of operations in Russia. Volkswagen, for example, said it would stop exporting vehicles to Russia in addition to suspending production at its two Russian factories, a decision that affects its Volkswagen, Skoda, Audi, Porsche and Bentley brands. Volkswagen delivered 216000 vehicles to Russian customers in 2021, accounting for about 2.4 per cent of the company's global sales, according to a Volkswagen spokesman.

On March 3, Japan's Toyota Group said in a statement that production in Russia would be suspended due to supply chain disruptions and that cars would no longer be exported to Russia until further notice. It is understood that Toyota makes Camry cars and Rongfang models at its St. Petersburg plant and produces as many as 80,000 cars a year, most of which are sold in Russia.

In addition to the closure of Toyota's St. Petersburg plant, most European brands, including Honda, Volvo, Mercedes-Benz, BMW and Jaguar Land Rover, have announced that they have stopped exporting and selling to Russia. Earlier this month, BMW suspended production at its Russian plant, but said its production in Germany and other European countries would also be affected to varying degrees. It is understood that BMW is the top luxury brand in the Russian market in 2021, selling a total of 46800 cars. BMW, which has been working with local Russian partners for more than 20 years, has just completed a new round of contract renewal until 2028 and is investing 350 million euros in plant expansion.

Volvo also announced a moratorium on exports to Russia. Volvo said last Monday that it would stop exporting vehicles to the Russian market until further notice. The move makes Volvo the first international carmaker to stop selling cars in the country after the conflict between Russia and Ukraine. It is understood that Volvo carmakers export cars to Russia from factories in Sweden, China and the United States, and sold about 9000 cars in Russia in 2021.

Although Russia and Ukraine do not have a high share of the automobile market, many automakers have layout of auto parts and key products, and the conflict between Russia and Ukraine will also affect automobile production. It is understood that Ukraine is a wire harness supplier to all European automakers, but at present, many factories in Ukraine have suspended production, resulting in an urgent shortage of wiring harness for European automakers. In addition to automotive wire harnesses, key products provided by Ukraine include neon gas for chips and palladium for catalytic converters. The same is true of Russia, where nickel production accounts for about 9 per cent of global output, which has had a major impact on the development of the auto industry. In addition, Russia is the world's largest palladium producer, accounting for about 40% of global production.

Although the Russian-Ukrainian market is small, the "butterfly effect" caused by the Russian-Ukrainian conflict in the automobile industry has begun to appear and gradually expanded because it is an important supplier of wire harness and neon, palladium, nickel and other elements. Jeff Schuster, president of global forecasting at LMC Automotive Consulting, said, "after the conflict between Russia and Ukraine, we have lowered our global new car sales forecast for 2022 by 400000 vehicles, and then we will make a new judgment based on the severity and duration of this conflict."

Welcome to subscribe to the WeChat public account "Automotive Industry Focus" to get the first-hand insider information on the automotive industry and talk about things in the automotive circle. Welcome to break the news! WeChat ID autoWechat