Renault is 'making progress' in talks over future of Russian unit AvtoVAZ

PARIS -- Renault Group is "making progress" in negotiating the future of its Russian unit AvtoVAZ, CFO Thierry Pieton said, following the suspension of operations amid the war in Ukraine.

Renault said last month that it was halting operations in Russia and would assess the future of AvtoVAZ, in which it holds a 68 percent stake, with the remainder held by Rostec, a Russian company. 

That move led Renault to cut its 2022 profit forecast by one full percentage point, to 3 percent from 4 percent, and it plans to take at least 2 billion euros ($2.16 billion) in charges related to the move in the first half of this year. 

Negotiations with the Russian authorities over AvtoVAZ are "ongoing and making progress," Pieton said Friday during the automaker's quarterly revenue call. 

AvtoVAZ makes the Lada, Russia's top-selling auto brand.

AvtoVAZ and Renault brand’s other Russian operations, represented about 10 percent of Renault Group’s revenues in 2021, Pieton said.

Renault's first-quarter results reflected the impact of the war in Ukraine, which started on Feb. 24:

• Lada's vehicle sales were down by 33 percent to 61,000 in the quarter;
• AvtoVAZ revenues fell by 23 percent to 527 million euros;
• Renault Russia revenues dropped by just 2.1 percent to 367 million euros. The decline was relatively low because of "destocking" and price increases, Pieton said.

Russia has said that foreign companies that leave the country following the invasion of Ukraine could be subject to repatriation of their industrial assets.

For Renault Group, that could include AvtoVAZ’s huge Togliatti factory, in which Renault has invested hundreds of millions to modernize, as well as a separate factory near Moscow that builds Renault and Nissan models for the domestic market. 

Renault Group CEO Luca de Meo planned to move Lada’s aging lineup to the modern Renault-Nissan Alliance CMF-B platform to increase synergies with the Dacia brand in the coming years.

Other automakers, including BMW, Ford, Mercedes, Stellantis and Volkswagen, have suspended operations in Russia. But Renault has by far the largest presence in Russia, with Lada the No. 1 brand. Combined, Renault, Lada and Nissan have about a 30 percent share of the Russian market.

AvtoVAZ was a bright spot for Renault in 2021, as de Meo’s budding turnaround plan began to slowly bear fruit.

AvtoVAZ contributed a disproportionate amount of Renault's automotive profits: 247 million euros, for an operating margin of 8.7 percent. Of Renault's approximately 2.7 million sales, Lada accounted for 385,000, or about 14 percent. 

But outside of AvtoVAZ, Renault's automotive operations made a profit of just 260 million euros, or 0.6 percent of revenues.