Mercedes-Benz to Sell Shares in Russian Subsidiaries to Local Investor, as Foreign Automakers Pull Out

The Mercedes-Benz logo at the 2019 Frankfurt Motor Show (IAA) in Frankfurt, Germany, on Sept. 10, 2019. (Ralph Orlowski/Reuters)

Mercedes-Benz announced that it was pulling out of Russia and would sell all of its shares in its local subsidiaries to a little known Russian investor.

The German automaker is the latest foreign car manufacturer to abandon the Russian market, after it suspended its local operations in early March, after the invasion of Ukraine.

It was revealed by Forbes that the local investor was Avtodom, a Russian car dealership chain.

No financial details of the Oct. 26 transaction were provided by either side, or any future plans for the brand.

The Russian Ministry of Industry and Trade later mentioned the transaction in a Telegram statement.

“Mercedes-Benz intends to sell its shares in Russian subsidiaries to a local investor, Avtodom,” the ministry said.

The German auto maker confirmed in a separate statement, that it would hand over its local shares to the Russian car dealer, reported AFP.

“The completion of the transaction is subject to the approval of all relevant authorities,” Mercedes-Benz said in the statement.

Mercedes’ 15 percent stake in Russian truckmaker Kamaz would not be affected by the latest move and the deal to transfer its shares to Daimler Truck is expected as planned, a company spokesperson said.

“The main priorities in agreeing to the terms of the transaction were to maximize the fulfilment of obligations to clients from Russia, both in terms of after-sales services and financial services, as well as preserving jobs of employees at the Russian divisions of the company,” said Natalia Koroleva, CEO of Mercedes-Benz Rus, in a press statement.

Goodbye Moscow

Mercedes-Benz’s CFO Harald Wilhelm, told investors at a presentation that the company’s withdrawal will not have any repercussions regarding the firm’s future finances, other than the losses already suffered in Russia during the second and third quarters.

“Final completion of the transaction is subject to the authority’s approval and the implementation of contractually agreed conditions,” Wilhelm said.

The Association of European Businesses reported that only 9,558 Mercedes-Benz cars were sold in Russia from January to September, a drop of 72.8 percent from 2021.

The Russian government said that “the new owner of the Russian divisions of Mercedes-Benz, Avtodom, will be able to attract other companies as partners for joint productions.”

Avtodom said it would find a local partner to restart operations at the Esipovo industrial estate northwest of Moscow, where Mercedes-Benz had its production plant.

The sanctions on Russia by many leaders in the international community have severely disrupted supply chains worldwide, with a big impact on the tech and car manufacturing sectors.

Most Western auto companies left Russia due intense political and logistical pressures when the war in Ukraine started in late February.

“Mercedes-Benz has already suspended the export of passenger cars and vans to Russia as well as the local manufacturing in Russia at the beginning of the year,” a spokesperson for the German auto maker told CBS News.

Foreign Automakers Flee Conflict, Sanctions

Mercedes-Benz’s confirmation came the same day that Ford Motor Company completed its exit from Russia.

Ford gave a press release, saying that it had sold its remaining Russian ventures and that it “[followed] the full suspension of all operations in Russia, including manufacturing, supply of parts, IT, and engineering support, in March this year.”

The American automaker sold its 49 percent share in the Sollers Ford Joint Venture, which will be transferred to its Russian partners for a nominal value.

The deal allows Ford to retain the option to repurchase them within five years “should the global situation change,” the company said in its statement.

Japanese car company Toyota announced its departure from Russia back in September.

Its fellow Japanese rival, Nissan, also left Russia earlier this month with a $687 million loss, after handing over its stake in AvtoVAZ to a state owned company for a single euro, according to a company statement.

Renault, which was another shareholder in AvtoVAZ, sold its majority stake for a similar amount at only one ruble.

Mazda is looking to pull out as well and Volkswagen is still actively looking for a local buyer to acquire its Kaluga factory, even though the production plant has been shuttered since the start of the war.

South Korea’s Kia is still deciding whether to keep its St Petersburg plant in operation, which is run by Hyundai Motor’s Russian subsidiary.

Both Nissan and Renault retain six-year buyback clauses, similar to that of Ford.

It is unknown if Mercedes-Benz has a similar clause in its deal, but there have been rumors in the Russia media that it contains one as well.

Reuters contributed to this report.