Renault SA is mulling downsizing its operations in Russia over mounting pressure on the French car manufacturer to halt their businesses after their invasion in Ukraine as per people who are aware of the matter.
More on Renault’s decision
The board of Renault is thinking about whether they should suspend its business operations in Russia or take some other measures as per people who decline to be named as the matter is still in internal deliberation. The people said that a decision would be made soon.
Since President Vladimir Putin invaded Ukraine, Renault has been under scrutiny over its future in Russia. The auto manufacturer has deep interests in the country with a majority ownership stake in AvtoVaz with its assembly plant close to Moscow. AvtoVaz has been the manufacturer of Lada vehicles since the Soviet Era.
As per Bloomberg News, Renault happens to be the one and only major player who has not stopped trade with Russia in its local production. Other automakers such as Stellantis NV have suspended the export and import of cars from Russia. In contrast, others like Volkswagen AG, Mercedes-Benz AG, Toyota Motor Corp., and Nissan Motor have also stopped exports.
Renault, which gets 10% of its total revenue from Russia, is worried about the high costs of pulling out of the AvtoVaz venture and is trying to keep its long-standing ties intact. The French Government, the most powerful shareholder, has back Renault’s position.
Renault has a 30% market share in the Russian car market and employs nearly 40,000 in the country. Fitch, the credit rating company, has warned that the car manufacturer turnaround could get derailed because of the ongoing war.
As per a note by Jorge Velandia, an analyst with Alpha value SAS, Renault is expected to make a provision of $1.1 billion in AvtoVaz this year and could post the operating loss. The research firm has downgraded the Renault stocks as it sees a low chance of the carmaker to exit its venture even as Global investors shun Russian assets.
The joint venture in Russia now has zero long-term value effects on of sanctions by Western countries can have a bearing on the economy of Russia with the possibility of demand for cars going down drastically.
After the invasion, Renault reduced its production outputs in its Moscow factory. Two other factories at Izhevsk and Togliatti, operated by AvtoVaz, have been shut due to a shortage in components supply.
The Rostec State Corp., the defense conglomerate owned by the Russian Government, is the other partner in AvtoVaz. Sergey Chemezov is the head of it, who happens to be a close ally of President Putin and on the list of sanctioned individuals of the U.S.
