The Renault Group is one of the major manufacturers most closely linked to the Russian automotive industry. Renault plays a leading role in the Russian market. There, together with the Lada brand, they dominate car sales with an iron fist. Faced with a hypothetical definitive exit from Russia, the Renault Group faces a whole series of costs in the short and long term.
At the time that the war broke out in Eastern Europe and, more specifically in Ukraine, economic sanctions against Russia were not long in coming. In a very short time, the main automobile manufacturers with an industrial presence in Russian territory announced the indefinite suspension of their operations. However, there were some giants of the car industry in Europe who resisted as much as possible to avoid having to close, even if it was temporarily. And one of them has been the Renault Group.
The Groupe Renault plays a leading role in the Russian car market. Moreover, it dominates this territory through the Renault and Lada brands. That is why any type of decision that had to do with stopping its activity, both industrial and commercial, was a real setback for the strategic plans established about a year ago by Luca de Meo himself, CEO of the Renault Group.
Renault stops making cars in Russia and studies what to do with AvtoVAZ
Just a few days ago the news broke. The Group Renault announced the suspension of its industrial activity in Russia. The company has stopped making vehicles and, more importantly, made it clear that will study what to do with the majority stake it has in AvtoVAZ. A company through which the successful models of the Lada brand are produced.
The future of the Lada brand, or rather the connection of Lada with the Renault Group, is being decided these days. De Meo has already pointed out that it will be necessary to review the economic forecasts established for this year. Everything indicates that the Renault Group has decided to “put on the bandage before the wound.” And it is that a very complicated future is glimpsed for this very important company.
The suspension of activities in Russia, and the fear of a hypothetical definitive departure from this market, entails a whole series of short- and long-term costs for the Renault Group. And it is that Russia is the second largest market for the French automobile conglomerate. The immediate impact will be approximately €2 billion in charges from the liquidation of its Moscow factory and its key stake in AvtoVAZ. Logically, to this must be added the reduction in cash flow.
The Groupe Renault first took a 25% stake in 2008 at a cost of more than 1,000 million dollars and gradually increased its participation until reaching the current majority position. The takeover of AvtoVAZ has been accompanied by large investments to modernize the company’s large factory in Togliatti and, above all, to promote the renewal of Lada. It was in the year 2008 that AvtoVAZ reached the economic break-even point.
The synergies between Dacia and Lada are in danger
The “Renaulution” roadmap presented by the Renault Group clearly established a whole series of synergies between the Dacia and Lada brands. However, and in this new situation, the plans set by De Meo have ruined this possibility. One of the big moves was to combine Dacia and Lada into a single business unit that could share development processes, platforms, components, etc… A strategic alliance that could consolidate and ratify the two brands in their main markets.
We have a clear example with the third generation of the Dacia Duster, scheduled for 2024, and the future Dacia Bigster. These two models will have their direct alternatives under the Lada brand. The new Lada Niva in short and long version. There is even speculation with an additional model under the Renault brand as a result of these developments. The final objective of the current strategic plan, whether or not it is modified, is the year 2025. By then, the entire Dacia and Lada range will be supported by the CMF-B platform.
There is no doubt that the Group Renault lives a vital conjuncture and that, in one way or another, will have a negative impact on their economic situation in the short and medium term. The level of damage that the Group’s accounts may suffer will depend on the time it takes to answer all the questions and doubts about the future of the Russian automotive industry and its connections with the European Union.
Source: autonews