Renault Considers Curbing Russia Operations Over Ukraine
Renault Considers Curbing Russia Operations Over Ukraine
(Bloomberg) -- Renault SA is considering curbing operations in Russia as pressure mounts on the French automaker to stop doing business in the country over its invasion of Ukraine, according to people familiar with the matter.
The company’s board is considering whether to suspend activities or take other measures, said the people, who declined to be named discussing internal deliberations. A decision could be made as soon as Wednesday, they said.
Renault has been under growing scrutiny about the future of its operations in Russia since President Vladimir Putin’s invasion of Ukraine. The automaker has deep ties in the country through its majority ownership of AvtoVaz, the maker of Lada vehicles that date back to the Soviet era. Renault also has its own assembly plant near Moscow.
MORE: Ukraine Urges Renault Boycott Over Decision to Stay in Russia
Renault is the only major global automaker not to have retreated either on trade with Russia or from production at local factories. Rival Stellantis NV suspended imports and exports of cars from the country, part of a broad pullback including Volkswagen AG, Toyota Motor Corp. and Mercedes-Benz AG. Even Renault’s Japanese partner Nissan Motor Co. halted exports.
Renault, which gets about 10% of its revenue from Russia, has kept longstanding ties with Russia intact because it’s worried about the high cost of pulling out of its AvtoVaz venture, Bloomberg has reported. Renault’s position was backed by the French government, its most powerful shareholder.
The carmaker has about 30% of the Russian car market and a staff of roughly 40,000 in the country. Credit rating company Fitch has warned the manufacturer’s turnaround could be derailed due to the war.
The company could book a 1 billion-euro ($1.1 billion) provision this year on AvtoVaz, which could post an operating loss in 2022, Alphavalue SAS analyst Jorge Velandia wrote in a note. The research firm downgraded its recommendation on shares, saying it saw a “low likelihood” of Renault exiting its stake in the venture as global investors shun Russian assets.
The value of the venture has fallen to zero due to long-lasting implications that Western sanctions could have on the Russian economy, possibly drastically reducing car demand in the country for years, Alphavalue said.
Renault slowed output at its Moscow factory after the invasion. Two other factories operated by AvtoVaz at Togliatti and Izhevsk have mostly been shut due to shortages of components, the venture has said.
AvtoVaz’s other partner, Rostec State Corp., a Russian government-owned defense conglomerate, is headed by Sergey Chemezov, a close Putin ally who is on the U.S. list of sanctioned individuals.
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