A view of Great Wall Motors factory in Southwest China's Chongqing on June 12 Photo: VCG

Great Wall Motors (GWM), one of China's top carmakers, has admitted a huge loss in a commercial dispute in Russia, but it claimed that this was an isolated incident that won't have any impact on the company's plans and operations in that country.

Responding to recent reports that GWM was defrauded of $58.4 million by a Russian distributor, the company issued a clarification on Tuesday, saying that it had recorded 323 million yuan ($46.9 million) of bad debts in 2017 arising from a commercial dispute with Russian car dealership. 

The amount was equivalent to 0.33 percent of GWM's total revenue in 2018 and 6.32 percent of its profit that year. The commercial dispute will not influence GWM's operations in Russia, and GWM will fully defend its legal rights and interests. GWM believes Russia's judicial authorities will give fair treatment to the case, read the note.

The note said that since October 2014, Russian distributor Irito had failed to pay a total of $48.44 million to GWM due to devaluation of the ruble. GWM filed a suit in October 2015, demanding that Irito subsidiary IMS pay the money, but a local court dismissed the appeal, saying that IMS had filed for bankruptcy. GWM's further appeal in 2018 has not received any response from the local court.

Such commercial disputes have limited impact on a big company like GWM and will not change its resolve to "go global," according to an analyst.

"Commercial disputes like this could happen in any market. It's an isolated incident and an obstacle GWM must overcome to reach its ambitious goals," Zhang Zhiyong, founder of the Beijing-based car data service provider iwenfeng.cn, told the Global Times on Wednesday.

"But it does remind Chinese companies to attach greater importance to researching the local legal, business and media environments when they are exploring foreign markets," Zhang added.

Russia is an essential part of GWM's global drive. It recently announced that it had completed construction of its plant in Russia's Tula region, which attracted lots of attention.

"I believe our globalization strategy has the potential to go beyond opening international markets, it will propel Haval - a sport utility vehicle brand of GWM - to be a key player on the global auto stage," Wei Jianjun, chairman of Great Wall Motors, said in June when the $500 million facility finished construction.

For Chinese auto brands, Russia's market size and consumer demand are attractive. Chinese brands can also approach Eastern European countries by establishing plants there, said Zhang.

GWM's shares closed at 9.29 yuan on Wednesday, up 0.22 percent.
Newspaper headline: GWM admits losing $46.9m in commercial dispute in Russia