BMW is the latest name on a long list of automakers announcing production disruptions in the wake of Russia's invasion of Ukraine. Its tie-up with Avtotor to assemble cars from semi-knocked-down (SKD) kits has come to an abrupt halt "due to the current geopolitical situation." The statement was made by a company representative while speaking with Reuters.
The luxury brand has also stopped exporting cars to Russia for the same reason, until further notice. Separately, a BMW spokesperson told The Wall Street Journal: "We condemn the aggression against Ukraine and follow developments with great concern and dismay." In addition, production bottlenecks at other factories outside of Russia are expected because some suppliers are based in war-torn Ukraine.
BMW's decision to put the brakes on car production in Russia comes only a couple of weeks after the German marque renewed its partnership with Avtotor until 2028. The factory located in Kaliningrad will be upgraded to accommodate a full production cycle rather than just SKD kits for the best-selling models in the country: 5 Series, X5, X6, and X7.
When the announcement was made in mid-February, the investment of at least 32 billion RUB represented approximately $414 million. However, the Russian ruble's value has plummeted in recent days following sanctions applied by the European Union and those 32B RUB are now worth only $300M.
Avtotor is doing business not only with BMW but also with Kia and Hyundai after putting an end to previous agreements with Chery Automobile and General Motors. Models such as the Cadillac Escalade and Hummer H2 used to be made at the Kaliningrad plant before the collaboration with GM ended in 2015.
Sources: Reuters, The Wall Street Journal