Russia’s invasion of Ukraine has not only devastated the latter country but has also caused reverberations throughout the world. One of the many businesses affected by the conflict is Renault, which has a majority stake in the Russian carmaker AvtoVAZ (and its Lada brand) and builds cars there.
Now, the French carmaker will reportedly sell its 63% share back to Russia through the state-owned Central Scientific Research Automobile and Automotive Engines Institute (NAMI) – the maker of Russian president Vladimir Putin’s limousine, the Aurus Senat – according to Automotive News Europe. The transaction will cost a symbolic one ruble (6 sen).
The former Moskvitch plant in Moscow – also owned by Renault – will be passed to the city government, said Russia’s trade ministry. Renault and its major stakeholder, the French government, both declined to comment on the deal, first reported by Russian news agencies which cited trade minister Denis Manturov.
The ministry added that the deal was necessitated by Renault not being able to keep its Russian operations going. The company, said to be the Western carmaker most invested in the local market, initially suspended production in Moscow in the wake of the invasion due to logistical issues but restarted activities a month later, The Guardian reported. On March 23, Renault announced it would be shutting down the Moscow plant a second time and “assess” its options for the AvtoVAZ stake.
Renault maintains the right to buy back its AvtoVAZ stake within five to six years, although Manturov suggested it will cost more than the solitary ruble the company sold it for, reported Interfax. “If during this period we make investments, then that will be taken into account when it comes to the cost. There won’t be any presents here,” he was quoted as saying.
The company first purchased a 25% stake of AvtoVAZ for more than US$1 billion (RM4.3 billion) in 2008. It gradually raised its shareholding over the years, fully consolidating Russia’s biggest carmaker in its balance sheet by 2017. The following year, Renault – together with another state-owned firm, the defence conglomerate Rostec – took over AvtoVAZ by purchasing 100% of its shares.
It was only in 2021, as part of its Renaulution strategy reveal, that Renault announced it had planned to combine Lada with its other budget brand, Dacia, into a single business unit. Last month, its Russian operations registered a 15.7% drop in revenue in the first quarter of the year, with AvtoVAZ losing 23.1%. The poor performance, a direct result of the Ukraine invasion, contributed to Renault’s overall revenues falling 2.2% compared to the same period last year.
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