New Delhi: The Volvo Group is among the companies which have suspended their operations in Russia since the war on Ukraine started over 40 days ago. As a result, the company expects its operating income to take a significant hit during the quarter ended March 31, 2022. ‘In the first quarter of 2022, assets amounting to about SEK 4 billion (INR 3,200 crore) will be provided for and this will have a negative impact on the operating income, primarily in the Financial Services segment’, the company said in a press statement today.
Volvo has a manufacturing plant with an annual production capacity of 15,000 units in the Russian city of Kaluga. Total assets of the company in Russia are valued at around SEK 9 billion (INR 7,200 crore), ‘of which approximately SEK 6 billion (INR 4,800 crore) is cash items that could be materialised over the coming years’, according to the company.
About 3% of the Volvo Group’s sales revenue of SEK 372 billion (INR 2.9 lakh crore) was ‘attributable’ to Russia in 2021. Volvo had invested SEK 783 million to set up the Kaluga plant.
The Russia-Ukraine war has not only resulted in large-scale destruction but also dented industry players’ plans. Earlier, German luxury car OEM, Audi, flagged off about a potential impact of the ongoing war. In its annual guidance for 2022, the OEM stated that ‘without impact of the Ukraine war’, it plans to sell 1.8 million to 1.9 million units this year. The war impact cannot be wished away though for these OEMs, and their industry peers.
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The Kaluga region, 190 kilometres (120 miles) southwest of Moscow, says it has attracted more than 1.3 trillion roubles ($15 billion) in investment, mostly foreign, since 2006. But Western sanctions imposed in recent weeks over Russia’s invasion of Ukraine have exacerbated lingering component shortages and halted production at two flagship car plants, Germany’s Volkswagen and Sweden’s Volvo.