June 25, 2022

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It has 45,000 employees in Russia

It has 45,000 employees in Russia

The war in Ukraine had consequences for many auto manufacturers. Some have subcontractors in Ukraine and have had challenges with parts of them. A number of Western car brands also have production facilities in Russia. Here, there is now a sudden stop for the vast majority.

Renault was the hardest hit. Last year, 8 percent of their total income came from Russia. They have achieved significant sales in the country, at the same time owning 68 percent of AutoVAZ, which produces Lada, among other things.

In all, Renault and AvtoVAZ have at least 45,000 employees in Russia. They are now facing precarious times.

Difficult but necessary

Now it is clear that Renault sells everything it owns in Russia. It has just been confirmed that the French company will transfer the entire stake in AvotVAZ to the NAMI research institution in Moscow. The price should be 1 ruble, or about 12 Norwegian euros at today’s exchange rate. According to reports, this stake will then be transferred to the city administration of the Russian capital.

Renault boss Luca de Meo described the decision to withdraw from Russia as difficult but necessary. Photo: NTB Scanpix.

Today we made a difficult but necessary decision. Luca de Meo, CEO of Renault, says we are making a responsible choice for our 45,000 employees in Russia.

He probably didn’t have many options in this case either. Renault first tried to sit in the boat and drive as normal. But after Ukrainian President Volodymyr Zelensky spoke directly to the French parliament in March and asked politicians to pressure all French companies to withdraw from Russia, that quickly changed. Renault was highlighted as an example, calling for a global boycott if they did not respond.

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Make less advanced cars

Just hours later, Renault announced that it would immediately halt all activities in Russia. In addition, they should think about their future at AvtoVAZ.

So far the process is over. However, Renault will have the opportunity to buy back its stake within the next six years. But then with deductions for all investments made in the company in the meantime.

How it will go with AvtoVAZ in the future is not clear. In many of its operations, the company relied on knowledge, technology and spare parts from Renault. When this disappears almost overnight, finding alternative solutions becomes a daunting task. Among other things, it is believed that now they have to build cars much less advanced than before and remove important equipment, in order to maintain a certain production.

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Renault is withdrawing from AvtoVAZ, which will have dire consequences for Russia's largest automaker.  Photo: NTB Scanpix

Renault is withdrawing from AvtoVAZ, which will have dire consequences for Russia’s largest automaker. Photo: NTB Scanpix

It will cost expensive

It is also expected that the demand for new cars in Russia will decline sharply in the coming years, as a result of the war and widespread sanctions against the country.

Until recently, AutoVAZ’s goal was to build about three million cars a year by 2025. Now it seems very unrealistic.

At the same time, it is clear that the exit from Russia will cost Renault dearly. In the short term, there is talk of a reduction of at least NOK 20 billion.

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