Following pressure over its prolonged presence in Russia, Renault has stated that it will sell its majority holding in Avtovaz. The French automaker announced that it will sell its 68 percent stake in Renault Russia to a Russian science institute, while its shares in Renault Russia will be donated to the city of Moscow.
Renault’s Russian assets, according to Moscow, have now become state property.
It is the first time since the invasion of Ukraine that Russia has nationalised a significant international company.
“Agreements were signed on the transfer of Russian assets of the Renault Group to the Russian Federation and the government of Moscow,” Russia’s industry and trade ministry said.
The deal’s financial terms were not disclosed, although Russian Industry and Trade Minister Denis Manturov stated in April that Renault wanted to sell its Russian holdings for “one symbolic rouble.”
Renault Group’s board of directors approved arrangements to sell Renault Russia to the Moscow city body, as well as its 67.69 per cent ownership in Avtovaz to the Russian Central Research and Development Automobile and Engine Institute, according to a statement released Monday (Nami).
Renault’s Moscow plant, Avtoframos, which produces Renault and Nissan vehicles, was also included in the purchase.
The plant’s production will now recommence under the Soviet-era Moskvich name, according to Moscow Mayor Sergei Sobyanin.
Renault boss Luca de Meo said: “Today, we have taken a difficult but necessary decision; and we are making a responsible choice towards our 45,000 employees in Russia, while preserving the group’s performance and our ability to return to the country in the future, in a different context.”
The deal, which Renault estimates will cost €2.2 billion ($2.29 billion), includes a six-year option for the group to purchase back its stake in Avtovaz.
Avtovaz is Russia’s largest automobile manufacturer, producing the popular Lada brand.
Renault stated in March that its Moscow factory would be shut down.
It occurred after Ukrainian President Volodymyr Zelensky demanded that Renault and other French corporations leave Russia, accusing them of “funding the slaughter of women and children.”
Renault’s CEO, Luca de Meo, said the company was making a responsible decision, but how much of a choice did it have?
The corporation hesitated in the early days of the conflict, opting to stay in Russia when other multinational brands left.
However, it halted operations in late March after being named by Ukraine’s President Zelensky, who said that Western corporations in Russia were helping to pay Vladimir Putin’s war.
Renault estimates that abandoning its Russian business will cost $2.3 billion. It will lose a significant market that was once considered as a crucial source of growth. It will also lose Lada, a brand that was essential to Renault’s inexpensive car strategy.
Renault may conceivably not stay in Russia. However, it has already suffered significant reputational damage.
Since Russia’s invasion of Ukraine in February, hundreds of worldwide brands, including Starbucks, Coca-Cola, Levi’s, and Apple, have departed the country, with many more considering to sell their enterprises there.
Shell revealed last week that it had agreed to sell over 400 of its petrol outlets in Russia to Lukoil, the country’s second largest oil company.
Moscow has repeatedly warned that it may nationalise idle firms or production lines.
(Adapted from BBC.com)