Russian boomtown car stops due to Ukrainian sanctions

Russian boomtown car stops due to Ukrainian sanctions

Russian boomtown car stops due to Ukrainian sanctions

  • Kaluga auto plants stop production
  • Demand for cars falls, food prices rise
  • Some hope the Western resolution will not last
  • Others have already seen the crises pass

April 5 (Reuters) – Thousands of auto workers have been laid off and food prices are soaring as Western sanctions hit the small Russian town of Kaluga and its major foreign carmakers, with more sanctions likely on the way.

The Kaluga region, 190 kilometers (120 miles) southwest of Moscow, says it has attracted over 1.3 trillion rubles ($ 15 billion) in investment, mostly foreign, since 2006.

But Western sanctions imposed in recent weeks after Russia sent tens of thousands of troops to Ukraine exacerbated persistent component shortages and halted production at two flagship auto plants, German Volkswagen (VOWG_p.DE) and Volvo. Swedish (VOLVb.ST).

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A third, the PSMA Rus plant, which is a joint venture between Stellantis (STLA.MI) and Mitsubishi (7211.T) and employs 2,000 employees, may soon stop production due to a lack of parts, the l ‘CEO of Stellantis. to know more

“It is not clear what will happen. They do not give us any concrete information,” said Pavel Terpugov, a welder at the PSMA Rus plant.

Terpugov said he needed twice as much money to buy groceries than before the sanctions. Analysts have predicted that Russian inflation could rise to 24% this year, while the economy could shrink to 2009 levels.

The US and Europe are considering more sanctions against Russia after Ukraine accused Russian forces of killing civilians in northern Ukraine, where a mass grave was found in Bucha, outside Kiev. to know more

Russia calls its actions in Ukraine a “special operation” and the Kremlin has categorically denied any allegations relating to the murder of civilians, including in Bucha.

A source of hope for some in Kaluga, with its 325,000 residents, is that the West may be reluctant to harm its own businesses.

“Does it make sense to impose penalties on your plant and lose money?” said Valery Uglov, an auto mechanic at the Volkswagen plant. “Does it make sense to lose the Russian market?”

“We hope to get back to work as soon as possible and everyone will have confidence in the future again,” said Uglov.

Volkswagen, whose factory employs 4,200 people, suspended operations at the beginning of March. A spokesperson said production remained frozen.

The Volvo group, which employs over 600 people to build trucks, has also suspended production.

Even before the sanctions, Russian car sales had shrunk from 2.8 million units since the Volkswagen factory opened in 2007 to 1.67 million units last year, hurt by both sanctions following the annexation of Crimea. in 2014 and the COVID-19 pandemic.

Some factories stopped production last year due to the disruptions caused by the pandemic.

“We had similar permits at the factory … but now, of course, the situation is different, more serious,” said Alexander Netesov, warehouse manager at the Volkswagen plant. “But we’re waiting anyway, we’re not losing hope,” he said.

In a sign of the squeeze workers are experiencing, Netesov said a new Polo car he ordered at a factory discount has increased in price by 20% since his pre-order.

Others in the city, which also boasts manufacturing pharmaceutical and food companies in addition to Samsung TVs (005930.KS), draw optimism that nearly every crisis that has ravaged the Russian economy over the past two decades has been followed by a boom.

“I hope, we all hope, that everything will stabilize in the near future,” said Angelina Minnigulova, marketing executive at Volkswagen dealer KorsGroup, who has seen demand drop as car prices rise.

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Reuters reporting; Written by Conor Humphries; Editing by Lisa Shumaker

Our Standards: Thomson Reuters Trust Principles.

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