Renault freezes plans for Russian van production on weak ruble

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MOSCOW (Reuters) -- Renault has frozen plans to produce vans with Russian truckmaker ZIL due to a weakening of the ruble, a spokeswoman for the French carmaker said.

In August, ZIL signed a preliminary agreement to build Renault and Fiat vans at a Moscow factory, Reuters reported, citing a source close to the Russian company.

"Renault was in negotiations with ZIL about production of LCV [light commercial vehicle] cars," a Renault spokeswoman said on Tuesday. "Due to the weakening of the [ruble] Renault has frozen this project" and is looking at trying to find a solution to making the project profitable, she said.

Russia's Vedomosti newspaper earlier reported that both Renault and Fiat may drop the plans to assemble vans at ZIL.

Fiat declined to comment on Tuesday. ZIL did not immediately respond to a request for comment.

Russia's declining ruble has been a double-edged sword for automakers, which benefit if they are highly localized -- meaning they source the majority of the parts and assemble their cars in Russia. The falling currency makes these cars more competitive against more expensive imports.

However, the damage to consumer confidence from the political instability that has caused a plunge in the currency is expected to hurt all automakers eventually.

The ruble has fallen nearly 8 percent so far this year against the dollar owing to a stand-off between Moscow and Kiev and Russia's decision to annex Crimea in March. The currency has fallen 18 percent since the start of 2013.

Renault’s Russia plans

Renault is studying opportunities to produce LCVs locally in Russia, the spokeswoman said, and ZIL's plant remains one of the possible manufacturing sites though no investments have been made as yet.

The factory planned to assemble 50,000 vehicles per year, including 25,000 Renault Master vans and 25,000 Fiat Ducato vans, starting from early 2014, the source close to ZIL said last year.

Renault aims to increase its market share in Russia by taking full control of the country’s No. 1 carmaker AvtoVAZ later this year. Renault, which owns 43.4 percent of Nissan, paid $1 billion for an initial 25 percent stake in the Russian carmaker in 2008. Under a deal struck in 2012, Renault and its Japanese affiliate will take joint control of the Lada manufacturer in the course of 2014.

Automotive News Europe contributed to this report

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