Renault is selling its stake in Russia's Avtovaz, the manufacturer of the country's best-selling Lada cars, for a symbolic sum in one of the most significant retreats by a foreign company since the invasion of Ukraine.
The French group’s exit, involving a €2.2 billion writedown and sale of its businesses to a Russian state-backed body and to the City of Moscow, highlights the meagre options facing businesses trying to leave the country without huge losses on their investments.
Chief executive Luca de Meo said the decision to leave Russia had been "painful", but that the company was "forced to decide" because it was unable to build cars in the country.
Renault employed 45,000 people in Russia, mainly at Avtovaz’s vast Togliatti factory on the banks of the Volga river, and was more exposed than its rivals to the country, where a lack of parts had already ground its operations to a halt.
Mr De Meo told the FT Future of the Car Summit that the business was “looking at a solution that will allow them to keep their jobs into the future without running away and abandoning the thing”.
The deal involves transferring the French carmaker’s entire stake in its Renault Russia operations to the City of Moscow and its 67.69 per cent holding in Avtovaz to NAMI, a state-backed car research institute.
The sale, which also gives Renault a six-year buyback option on the businesses, was sealed for one rouble per stake, a person familiar with the deal said.
International companies in sectors from oil to banks have been trying to find a way out of Russia, with many simply suspending operations for now. That option leaves them exposed to paying employees for months, while producing little or no revenues at their Russian entities. But buyers are scarce, and dealing with sanctions-hit Russian entities also poses problems.
Britain's Shell last week agreed to sell its retail and lubricants businesses in Russia to Lukoil, the first big deal in the oil and gas sector. French lender Société Générale has notched up a €3.1 billion writedown by selling its Rosbank network to a group controlled by oligarch Vladimir Potanin.
Russia made up about 10 per cent of Renault's sales and half its operating margin. The company's exit follows a push under former boss turned fugitive Carlos Ghosn to expand in emerging markets, and its Russia venture, which began with a first investment in 2007, came with the encouragement and blessing of Vladimir Putin.
Renault spent years modernising some of Avtovaz’s Soviet-era installations and trying to improve operations and, until the war, had been hoping to expand exports of new models of Ladas.
The hit from Russia comes as the French carmaker is racing to invest in electric vehicles as manufacturers try to position themselves to produce cleaner cars and become more proficient as tech and software businesses.
Renault had already reduced its operating margin outlook for 2022 to 3 per cent from 4 per cent and it stuck by its financial guidance on Monday. – Copyright The Financial Times Limited 2022