Renault in talks to sell Russia business for one rouble

French car maker discusses handing over its 68% stake in Russia’s biggest auto maker to a state-backed entity.

The Renault automobile plant in Moscow on Tuesday. The company reportedly would have the option to buy back its stake within five to six years. Picture: AFP

French auto maker Renault is in talks with the Russian government about handing over its 68 per cent stake in Russia’s biggest carmaker to a state-backed entity, according to a report in state media.

The French carmaker is expected to sell its stake in AvtoVAZ for the symbolic sum of one rouble to NAMI, a state-backed automotive research and develop­ment centre, Russian Industry Minister Denis Manturov was quoted as saying by state-run news agency Ria Novosti.

The French carmaker would have the option to buy back its stake within five to six years as part of a potential deal, Mr Manturov said. He also said that Renault’s factory in the centre of Moscow, which makes vehicles under the Renault and Nissan brands, will be transferred to the city’s government, according to Ria Novosti. Last month, Renault said it was assessing options on its stake of AvtoVAZ and planned to write off the value of its Russian activities, which were valued at €2.2bn ($3.3bn) at the end of last year.

Renault and other Western firms have been under pressure to divest from Russia since its full-scale invasion of Ukraine began in late February, triggering waves of Western sanctions aimed at cutting off Moscow from the global financial system.

The sanctions have crippled supply chains, making it hard for foreign firms to operate in Russia while also depriving them of any Western buyers for their Russian assets.

The Renault factory in Moscow. The French carmaker is expected to sell its stake in AvtoVAZ for the symbolic sum of one rouble. Picture: AFP

Renault’s deep roots in Russia makes it a bellwether for other Western companies exploring options on how to leave the country. Renault invested billions of euros in Russia and last year had almost 30 per cent of market share there. It also employs some 40,000 people in the country. Russia’s lower house of parliament, the State Duma, is considering legislation that would allow Russia to nationalise the assets of foreign companies that have exited from the country in response to its invasion of Ukraine. The ruling United Russia party, which proposed the legislation, said it was aimed at preventing bankruptcies and preserving jobs. President Vladimir Putin approved the proposal.

Renault’s buyback options will be priced according to how much money is invested in AvtoVAZ while it is under NAMI’s stewardship, Mr Manturov said, according to Ria Novosti, adding: “There will be no gifts here.”

At the start of the war, Renault initially tried to keep its activities in Russia going while also exploring ways to leave the country. The firm tried to reorganise its supply chain to replace parts its factories were missing because of sanctions and the war in Ukraine.

As the war continued, however, Renault’s operations in Russia began to burn through their cash reserves. The carmaker had to continue paying salaries and suppliers as sales and production shrivelled.

Since then, the AvtoVAZ plant has been running at much reduced capacity as sanctions and the global chip shortage deprived it of key parts. Renault’s plant in Moscow, meanwhile, reopened for a few days last month to liquidate the stock of parts that it had on hand, but it has since been closed for weeks.

Stellantis – maker of the Jeep and Peugeot brands – last week suspended its operations in Russia, citing a “rapid increase in cross sanctions and logistical difficulties.”

NAMI is a Moscow-based automotive development and research centre founded in 1918 after the Bolshevik Revolution. The group co-owns Aurus, a Russian car company launched in 2018 that aims to produce luxury vehicles. Mr Putin that year drove through Moscow in an Aurus car on his inauguration day for a fourth term.

State-owned conglomerate Rostec Corp owns the remaining 32 per cent of AvtoVAZ. Its CEO, Sergei Chemezov, has been subject to Western sanctions for years over Russia’s annexation of Crimea.

AvtoVAZ produces Lada, Russia’s only homegrown brand with significant market share, accounting for 21 per cent of auto sales in Russia last year. The company was founded in 1966 when the Soviet Union built a mammoth factory on the banks of the Volga River and renamed the city that mushroomed around it after Palmiro Togliatti, the leader of Italy’s Communist Party at the time.

The Wall Street Journal