Mercedes-Benz's 2.2 billion asset in Russia could be under threat. Here's why

The ongoing Russia-Ukraine war could threaten German carmaker Mercedes-Benz's assets worth over 2 billion euros. The carmaker has said that the proposal to nationalise assets of foreign companies by Russian authorities in case of them leaving the country will be a big setback for the carmaker. Mercedes-Benz is among several global auto manufacturers, who have their production facilities in Russia, to have stopped imports and exports of vehicles with the country amid Moscow's invasion of Ukraine.

Mercedes-Benz logo on the roof of a building in Moscow, Russia. (File Photo) (REUTERS)
Mercedes-Benz logo on the roof of a building in Moscow, Russia. (File Photo)

Also read: Russia bans exports of cars, auto parts amid western sanctions

On Friday, Mercedes-Benz released its annual report which said that the war in Ukraine raised a range of risks from disruptions to parts to energy supply or even cyber attacks. "These risks could be exacerbated by the potential expropriation of assets of Russian subsidiaries," Mercedes-Benz said. Mercedes-Benz's reaction comes days after Russia's ruling party United Russia said a government commission had approved the first step towards nationalising the assets of firms more than 25 percent owned by foreigners from 'unfriendly states'.

Last week, Mercedes-Benz had joined other foreign carmakers to stop exports to Russia. The carmaker had issued a statement saying, "Mercedes-Benz will suspend the export of passenger cars and vans to Russia as well as the local manufacturing in Russia until further notice." Mercedes-Benz's partner Daimler Truck too had said it would freeze its business activities in Russia, including its cooperation with Russian truck maker Kamaz.

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Other carmakers like Honda, Toyota, Volkswagen, General Motors, Jaguar Land Rover, Ford and BMW not only suspended their operations, but also exporting their vehicles to the country as well.

Mercedes-Benz has one manufacturing facility in Esipovo near Moscow where it produces E-class sedans and SUVs. The facility has around 1,000 employees. The facility was inaugurated in April, 2019. Russian President Vladimir Putin attended the opening ceremony of the facility. Putin had said the plant would produce 25,000 cars every year with an investment of nearly $300 million.

Mercedes offers as many as 25 models in Russia which include vehicles from the C-Class, E-Class, S-Class, V-Class, AMGs and Maybachs. It also offers electric cars like EQE and EQS.

Mercedes-Benz said its Russian assets, which were valued at 2 billion euros as of the end of 2021, have approximately 1 billion euros of liabilities to banks, for which the carmaker has issued a global guarantee.

The Mercedes plant near Moscow is the first facility to be opened by a foreign carmaker in Russia in years after foreign investment into Russian auto industry had dried up amid western sanctions and a stagnant economy.

First Published Date: 12 Mar 2022, 09:21 AM IST
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