Renault is selling its entire Russian operations, including its stake in Lada maker Avtovaz for 2 rubles, in one of the biggest retreats by a foreign company since the invasion of Ukraine.
The exit of the French group, which involves a depreciation of 2.2 billion euros and the sale of its activities in Russia to a state-backed group and the city of Moscow, highlights the lack of options for companies trying to leave the country without huge losses on their investments.
Chief executive Luca de Meo told the FT last week that the decision to leave Russia had been “painful”, but the company was “forced to decide” because it was unable to build cars in the country.
Renault employed 45,000 people in Russia, mostly at the vast Avtovaz factory in Togliatti, on the banks of the Volga. It was more exposed than its domestic rivals and a lack of parts had already halted operations.
De Meo told the FT Future of the Car Summit last week that the company was “studying a solution that would allow [people] to keep their jobs in the future.
The deal involves transferring the company’s entire stake in its Renault Russia operations to the city of Moscow and its 67.69% stake in Avtovaz to NAMI, a state-backed automotive research institute.
The sale, which also gives Renault a six-year buyout option on the companies, was sealed for one ruble per stake, according to a person familiar with the deal. At current exchange rates, there are 64 rubles per dollar.
Renault is 15% owned by the French state. If the company had not left Russia, “its sales [there] would have collapsed and would have had to face massive losses for an indefinite period,” the French economy ministry said.
Russia accounted for around 10% of Renault’s sales and half of its operating margin.
International businesses, from oil companies to banks, have been trying to find a way out of Russia, with many simply suspending operations for the time being. This approach can leave them with payrolls to pay, but little or no income in the country. At the same time, buyers are scarce, and dealing with sanctioned Russian entities also poses problems.
Britain’s Shell agreed last week to sell its retail and lubricants business in Russia to Lukoil, the first big deal in the oil and gas sector. The French bank Societe Generale received a depreciation of 3.1 billion euros by selling its Rosbank network to a group controlled by the oligarch Vladimir Potanin.
McDonald’s said on Monday it would be selling outside of Russia and wanted to find a local buyer to hire its employees.
Renault’s Russian adventure was part of its strategy of expanding into emerging markets. Its first investment in the country in 2007 was encouraged by Vladimir Putin.
He spent years modernizing some of Avtovaz’s Soviet-era facilities and improving operations, and until the war he hoped to expand exports of new Lada models.
Russia is set to restart production of Moskvitch vehicles – a Soviet-era car brand dating back to 1946 – to maintain jobs at the Renault factory, Moscow Mayor Sergei Sobyanin said in a blog post. They will be produced in conjunction with Russian truck maker Kamaz, with government help to source and manufacture parts, Sobyanin said.
Renault’s exit from Russia comes as the company rushes to invest in electric vehicles as automakers position themselves to produce low-emission cars.
The company had already cut its operating margin outlook for 2022 to 3% from 4% and it met its financial guidance on Monday.
Additional reporting by Nastassia Astrasheuskaya in Riga