Hyundai will decrease the production volume at its St Petersburg plant by 6.3% this year to 215,000 units, the head of Hyundai Motor Manufacturing Russia has said.
“In 2015 we will continue stable operation without any changes, and target production of 215,000 cars,” he said. According to Hyundai, the plant suspended production on January 1st, and will reopen on January 22nd, after the plant is fitted with equipment to produce the Creta model.
Unstable exports and the wider Russian economy have led to the decrease in production at Hyundai. In 2015, it exported just 14,200 cars, compared with more than 25,000 in 2014.
Hyundai had forecasted a decrease in its export figures, but still expected to reach 18,000 units by the end of 2015. More than 10,000 vehicles were exported to Kazakhstan, and around 2,500 units went to Lebanon and Egypt, where Hyundai had launched exports in the second half of 2015.
Sergey Bobryshev, head of Glovis Rus, which manages Hyundai and Kia’s logistics in Russia, said that establishing exports to regions outside CIS is common practice for local OEMs, but that supply channels are not yet well developed.
“Exports from the Russian Federation are traditional for the domestic automobile brands. They have a long history and proven channels since Soviet times. For foreign car brands until recently, exports were conducted exclusively in the CIS countries.” he said.
“Therefore, exporting to countries outside CIS is relatively new. In the current environment, foreign producers exporting cars from Russian plants have relatively modest volumes and are more focused on the ports of the Baltic Sea, due to localisation in the north-west and central regions of the country,” he added.
According to chief analyst at Russian agency Autostat, Azat Timerhanov, Hyundai may improve its market position this year by acquiring the market share of other OEMs that will have to leave.
“Most likely, Hyundai and Kia will continue to increase their market shares this year as they offer the best products in terms of price and quality. At the same time, a number of brands may leave number the market, including SsangYong, Suzuki, Chrysler and Jeep. They show a significant drop in sales due to the high dependence on the fluctuations of the exchange rate,” he said.
However, Vladimir Bespalov, analyst at VTB Capital agency, said that both Hyundai and Kia will have to increase their prices to maintain profitability in production and logistics.
"The effect of devaluation is not yet fully reflected in the cost [of cars in the market], so profit margins for market participants, including dealers and car factories, remains low. Part of the loss is taken by the parent companies,” Bespalov said.
