Renault CEO Carlos Ghosn said Friday that he expected its Russian unit, AvtoVAZ, to be profitable next year, even if the Lada maker's home market remains volatile.
AvtoVAZ had a negative impact of 89 million euros on the French automaker's financial results in 2016, which was an improvement on the 620 million euro hit it took because of AvtoVAZ in 2015, Renault said.
Renault invested more than $1 billion into AvtoVAZ for an initial 25 percent stake in 2008 but the Russian carmaker has since fallen victim to the collapse of the local market, where annual vehicle sales have more than halved since 2012.
Following a recapitalization late last year, Renault now holds more than 50 percent of AvtoVAZ, which said it incurred a net loss last year of 44.8 billion rubles ($761.75 million), including impairment and restructuring costs of 25 billion rubles. That compares with a record loss of 73.9 billion rubles in the previous year -- a hit which prompted Renault to slash the value of its stake in the firm by 225 million euros.
2 million in 2020
After four straight years of decline, which halved sales to 1.4 million last year, Russia is expected to grow by up to 5 percent this year, a welcome relief for foreign carmakers with local ties such as Renault. Ghosn, however, doesn't expect Russia to return to 2 million sales until 2020.
On a brighter note, Lada’s Russian sales rose 5 percent in January to 16,334, despite a 5 percent decline for the overall market, according to the Moscow-based lobbying group AEB. In 2016 Russian sales dropped 11 percent.
Ghosn remains bullish about AvtoVAZ because of the midterm recovery plan approved for the company in December that includes 12 new models, optimizing production, reducing inventories and further localizing the production of parts.
As recently as 2010, Lada brand held 27 percent of the Russian market, but that dipped to 15.5 percent in 2014. Last year, that figure rebounded to 18.7 percent, and Denis le Vot, who is a Renault senior vice president and chairman of its Eurasia region, has expressed confidence that new models such as the X-Ray crossover and Vesta sedan will push that figure above 20 percent.
On Friday, speaking to analysts and reporters in Paris, Ghosn was upbeat about the alliance's prospects in Russia.
“Let me remind you that the brands of the alliance today represent one-third of the Russian market, which is still a very high potential growth market for us,” he said. Last year, according to AEB, Renault/Nissan/AvtoVAZ held 33.5 percent of the market, up from 32.3 percent in 2015. The other major players in the Russian market were the Volkswagen Group, at 11 percent; Kia, at 10.5 percent; and the Hyundai, at 10.2 percent.
Reuters contributed to this report