French carmaker Renault sold its assets in Russia to the government of Moscow city. It can buy back its shares of AvtoVAZ within the next six years.
The assets of Renault Russia have been transferred to the Moscow city government, both parts announced on May 16.
The board of directors of Renault group unanimously approved the signing of agreements to sell 100% of Renault group’s shares in Renault Russia to the Moscow City entity.
Moreover, 68% of its shares of AvtoVAZ, the manufacturer of Lada cars and Russia’s largest automaker, become the property of NAMI, the Central Research and Development Automobile and Engine Institute, which belongs to the Russian Ministry of Industry and Trade. Rostec, the state-owned defense conglomerate, keeps the remaining shares of AvtoVAZ.
AvtoVAZ will produce Lada cars and carry out maintenance of Renault cars in Russia.
Renault and the Russian government agreed that the French carmaker can buy back its interest in AvtoVAZ within the next six years. Details of the deal price or financial conditions on the buy back have not been provided.
“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. I am confident in the Renault group’s ability to further accelerate its transformation and exceed its mid-term targets,” said Luca de Meo, CEO of Renault Group.
“This is how we will preserve key competencies, the production cycle and jobs,” said the minister of Industry and Trade Denis Manturov on Telegram.
The mayor of Moscow Sergei Sobyanin also announced that it took over Renault’s Moscow production plant and would resume production of passenger cars under the brand Moskvich created in the Soviet era whose production stopped years ago.
Renault suspended its activities in Russia since March 23. AvtoVAZ’s production lines have been disrupted since March with a lack of supply of components as they couldn’t import them due to the sanctions imposed for the Russian invasion of Ukraine. Summer vacation for employees scheduled from July 25 to August 14 was even advanced to April 4-24.
The Russian automotive market is struggling with a tenth consecutive month of slower car sales. In April, they fell by 79% year on year, the Association of European Businesses reported. Such a drop was explained by a “shortage of cars at warehouses,” as logistics is disrupted, “rising prices,” in the context of a volatile ruble, and “prohibitive rates on car loans,” as the Russian central bank raised its key rate to 20% in late February.
As of December 31, the accounting value of the consolidated intangible assets, property, plant and equipment and goodwill of Renault group in Russia was 2.2 billion euros (2.3 billion dollars).