German Automakers Cutting Ties to Russian Market

German automakers are suspending production in Russia and are halting imports of cars into the country in response to Russia’s invasion of Ukraine. The actions are a result of compliance with Western economic sanctions imposed on Russia, supply-chain disruptions or both.

The Volkswagen Group is denying Russian media claims that it is trying to circumvent sanctions by Western powers in response to the invasion now approaching its third month.

The Russian business journal Vedomosti had reported Volkswagen Group Rus could resume operations at its Kaluga and Nizhny Novgorod plants in June or July. The report says the automaker is considering routing components to the Russian plants through Turkey and Georgia.

However, a senior spokesman for VW tells WardsAuto in an email, “I can confirm that the claims made in that article are false – there are no plans by Volkswagen Group Russia to import parts through other countries.”

Reuters reports that the closure of the plant VW shares with Volvo in the Kaluga region southwest of Moscow is a big blow for the area’s economy that has received more than $15 billion in investment from automakers since 2006. Operations were suspended in early March as a result of the war. The factory employs 4,200 employees and had faced supply issues since the pandemic. The latest sanctions effectively continued the halt in production.

BMW Kaliningrad Russia

German luxury carmaker BMW also has said it stopped exports of vehicles to Russia and would cease assembly of vehicles with its partner in Kaliningrad (pictured, above).

“We condemn the aggression against Ukraine and follow developments with great concern and dismay,” a BMW spokesman says. “Due to the current geopolitical situation we will stop our local production and export for the Russian market until further notice.”

The automaker also says supply-chain disruptions, such as the closure of some supplier plants in Ukraine, would affect production at some factories. Perhaps wisely in hindsight, BMW decided two years ago against building its own plant in Kaliningrad and instead has a partnership with the Russian carmaker Avtotor, which assembles BMW vehicles from so-called semi-knocked-down vehicle assembly kits, The Wall Street Journal reports.

Mercedes-Benz Group also confirms it is suspending both vehicle exports to Russia and local production in the country, becoming the latest automaker to respond to Moscow's invasion of Ukraine.

“Mercedes-Benz will suspend the export of passenger cars and vans to Russia, as well as the local manufacturing in Russia, until further notice,” the company says.

The group’s Daimler Truck subsidiary also has halted its 12-year partnership with Russian heavy-truck maker Kamaz, which also makes armored vehicles.