Skoda Auto Plans to Exit Russian Market and Sell Assets, Facing Major Losses
Date
3/20/2023 3:16:49 AM
(MENAFN) Skoda Auto, a unit of Germany's Volkswagen, is reportedly close to finalizing a deal to sell its assets and exit the Russian market, according to the company's CEO Klaus Zellmer. The decision comes as Skoda has taken a hit of almost €700 million (USD742 million) due to disruptions in logistics chains caused by Western sanctions and the suspension of exports of cars and spare parts to Russia. The automaker produced about 780,000 cars globally in 2022, but its production in Russia plummeted to just 18,300 cars due to the Ukraine-related sanctions imposed by the EU. Skoda's net profit also slumped 11.7 percent to €489 million in 2022, primarily due to a sharp rise in raw material prices and global supply chain disruptions.
Zellmer explained that the Volkswagen Group has analyzed various scenarios for the future of its business options in Russia, and the preferred option is to sell the assets of Volkswagen Group Russia to a third party. He declined to provide details on the deal until all parties have agreed, but noted that talks on the sale were in the final stages.
Skoda's decision to exit the Russian market underscores the challenges faced by foreign companies amid sanctions and geopolitical tensions. The disruptions in logistics chains have made it increasingly difficult for companies to operate in the country, and the suspension of exports of cars and spare parts to Russia has had a significant impact on Skoda's operations. The decision to exit the market will likely result in major losses for the automaker, but it may be necessary in order to mitigate further risks and to focus on other markets.
The report also sheds light on the complex economic and political dynamics of the Russian market, where foreign companies must navigate a range of challenges in order to operate successfully. The case of Skoda Auto highlights the risks and uncertainties facing foreign companies in the country, and it underscores the need for greater transparency and predictability in Russia's business environment. As global supply chains continue to face disruptions and geopolitical tensions persist, foreign companies will need to carefully consider their operations in Russia and other markets in order to mitigate risks and remain competitive.
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