Posted Apr 27, 2022, 12:41 PM
Renault’s retreat from Russia is becoming clearer. A month after having announced the “suspension of its industrial activity” in the country, and the evaluation of “all its possible options concerning its participation in Avtovaz”, the Losange should finally cede its assets in Russia to a Russian state scientific institute specialized in the automobile, the NAMI, with the possibility of buying them back for a few years. Both its 68% stake in AvtoVAZ (which produces Ladas) and its Moscow plant (which produces Renault Capturs and Dacia Dusters) are affected.
It was the Russian Minister of Industry and Trade, Denis Manturov, who spilled the beans. “Among those who are discussing with us their departure, there is Renault, for the moment,” he said on Wednesday. “For lack of funds to maintain its activities in Russia, Renault has decided to sell the shares of AvtoVAZ and Avtoframos [his Moscow factory, editor’s note]. As for AvtoVAZ, it will most likely be NAMI, our specialized institute, which will take over the actions, with a possible return if colleagues decide to return.”
Transfer for one ruble
Asked, Renault makes no comment. But according to our information, negotiations are well underway with the scientific institute, which could lead to the coming days – around mid-May. According to Denis Manturov, the transfer would be for a symbolic ruble, and will include a possible buy-back option for “five or six years”. While rumors had circulated in the Russian press about a transfer to Chinese buyers, the minister also made it clear that there would be no Chinese or Korean shareholders in the capital of AvtoVAZ.
Even if he had not officially posted it, Renault’s desire to sell its Russian assets was clear. The Losange had announced at the end of March that it would record 2.2 billion euros in corresponding provisions, effectively passing its activities in the country through profit and loss. The factories had been shut down since the end of February for lack of certain components, partly because of the sanctions. And the French manufacturer, financially fragile, cannot afford to spend very long the cash necessary to pay its 45,000 employees on technical unemployment in the country, without benefiting from the corresponding income.
Forced and Forced
The takeover of these assets by the NAMI, which effectively amounts to a takeover by the Russian State, was one of the few solutions possible. A takeover by Rostec, the military-industrial complex that owns the remaining 32% of AvtoVAZ, seemed difficult: Since Rostec itself is subject to Western sanctions, AvtoVAZ would then also have fallen under sanctions. Similarly, the intervention of a bank or financial institution had been ruled out. The mentioned price of one ruble seems ridiculous, given the efforts made by Renault to turn the company around, but the Diamond actually has little bargaining leverage.
According to Denis Manturov, the idea is to resume production at the Russian factories of Renault and AvtoVAZ thanks to changes in logistics and suppliers in favor of Russian companies. The new management of AvtoVAZ will be appointed by NAMI together with Rostec, the minister also indicated.
AvtoVAZ operator since its gradual takeover from 2008, Renault sold 500,000 cars in Russia last year. The country accounted for 18% of its sales and half of its automotive branch’s operating profit last year.