The official reason provided by the automaker has to do with the current “geopolitical situation.”
Following Russia’s invasion of Ukraine, BMW is the latest in a long line of automakers to announce production halts. Due to the current geopolitical scenario, its collaboration with Avtotor to manufacture automobiles from semi-knocked-down (SKD) kits has come to a halt. While speaking with Reuters, a firm spokesperson made the statement.
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For the same reason, the luxury brand has halted automobile exports to Russia until further notice. “We deplore the attack on Ukraine and follow developments with great concern and dismay,” a BMW representative told The Wall Street Journal. Furthermore, because some suppliers are headquartered in war-torn Ukraine, manufacturing difficulties at other plants outside of Russia are likely.
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BMW’s decision to halt automobile production in Russia comes just weeks after the German automaker extended its relationship with Avtotor until 2028. The Kaliningrad factory will be rebuilt to allow a full manufacturing cycle rather than only SKD kits for the country’s most popular models: the 5 Series, X5, X6, and X7.
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The investment of at least 32 billion RUB constituted around $414 million when the announcement was made in mid-February. However, the value of the Russian currency has plunged in recent days as a result of European Union sanctions, and those 32 billion RUB are now only worth $300 million.
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Following the termination of earlier agreements with Chery Automobile and General Motors, Avtotor is now conducting business with not just BMW but also Kia and Hyundai. Before the relationship with General Motors terminated in 2015, the Kaliningrad plant produced Cadillac Escalade and Hummer H2 models.
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