Volkswagen sells its activities in Russia, including an assembly plant

Volkswagen has sold its assembly plant and other operations in Russia to a local car dealer more than a year after the German automaker halted production in the country following its invasion of Ukraine, the company said on Friday.

Under the deal, which required approval from the Russian government, a Moscow-based dealership named Avilon acquired the assets of Volkswagen Group Rus, the automaker said. Neither company has specified a sale price, but Russian media citing local data said Avilon paid about 125 million euros ($135 million).

Volkswagen made the announcement in a terse statement, but

declined to comment further on the deal.

The move makes Volkswagen the latest European automaker to pull out of Russia in the past year, joining several hundred other multinational companies that have left a market where many have spent decades building and building. But the outcry over Moscow’s brutal war in Ukraine, coupled with the difficulties of coping with harsh economic sanctions to punish Russia, have made the Russian market less attractive.

Mercedes-Benz announced last month that it had sold its Russian division, including an assembly plant, to Avtodom, a Russian investor, about a year after it halted local production and export of passenger cars and vans to Russia. The sale included a limited buyback option, the company said, but did not provide further details.

Last year, French automaker Renault negotiated a deal with the Russian government to sell its 68 percent stake in AvtoVAZ, Russia’s largest automaker, to a Moscow-based automotive research institute known as NAMI for the price of 1 ruble. with the possibility of resuming its activities. business in the country at a future date.

Volkswagen declined to say whether the sale included a return to Russia clause. In addition to the plant in Kaluga, a city in western Russia, Volkswagen sales also included the company’s parts and leasing divisions.

Avilon, based in Moscow, did not comment on the sale and it was not immediately clear what the plans were for the Kaluga plant.

Before the large-scale invasion of Ukraine, Avilon sold Volkswagen vehicles and dozens of other Western brands, including Mercedes-Benz, Jeep and Rolls-Royce. Since last year, it also sells leading Chinese brands, such as Chery, Great Wall and Zeekr.

Volkswagen spent €774 million on the construction of the Kaluga plant, which opened in 2007. Two years later, President Vladimir V. Putin of Russia flown in by helicopter to celebrate the launch of full production of several of the company’s best-selling models, as well as models from the Skoda line.

The plant had a capacity to produce 225,000 vehicles per year, nearly the number of vehicles the company will deliver to customers in Russia in 2021. Shortly after the invasion in February 2022, Volkswagen ceased operations at the plant. It also stopped making cars at another factory, in Nizhny Novgorod, which was owned by the Russian company Gaz Group but used by the German automaker.

Gaz Group sued Volkswagen over the shutdown, in an attempt to freeze the German company’s assets in Russia. Last month, a court ruled in favor of Volkswagen.

For the past year, the Kaluga plant’s 4,000 employees remained on payroll as they waited for information on whether they would be allowed to return to work. The inactive plant was a financial drain on Volkswagen, which is struggling to expand its electric vehicle offerings and revamp its core brand. It is also struggling to stay competitive in China, the world’s largest car market, where the German company is losing ground to local brands.

Observers believe that major companies waited several months to assess the situation before deciding to pull out. Large, multinational companies that had spent decades building supply chains and networks realized that the complexity and reach of those systems made it difficult to bring them to a halt quickly, says Sebastian Hoppe, a political economist at VU University Amsterdam. van Berlin doing research on Russia.

“The more suppliers you have in Russia itself, the more difficult it is to withdraw and the longer this whole process takes,” said Mr. Hoppe.

Automakers in Russia employed 300,000 people in 2021, according to the country’s statistics office, with an additional 3.5 million estimated to be employed in related industries. Those jobs have been devastated over the past year as car production has fallen by 77 percent, largely because Western companies have decided to raise their stakes and leave.

Other multinationals also decide to turn their backs on Russia. Henkel, a German manufacturer 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 is also important to me is that the Russian market is generally less attractive than it was before the war,” said Mr. Hoppe.