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French car maker Renault sells Russian operations to Moscow

French car maker Renault sells Russian operations to Moscow

Russia will take control of French automaker Renault’s operations in the country and revive a Soviet-era car brand, officials said Monday, marking the first major nationalization of a foreign company since the war in Ukraine began.

Renault said it would sell its majority stake in Avtovaz, a Russian car company best known for its Lada brand, to a state research institute known as NAMI.

Renault’s other operations in Russia, mainly a factory in Moscow, will be sold to the Moscow City Council. The mayor of the Russian capital, Sergei Sobyanin, said the city would bring back the Moskvich brand for factory-made cars. Moskvich was an important car brand in the Soviet Union, but declined sharply in the 1990s and disappeared from the market in the early 2000s.

“Today we made a difficult but necessary decision,” said Renault CEO Luca de Meo, “and we are making a responsible choice for our 45,000 employees in Russia, while improving the Group’s performance and our ability to return to the country in the future, in a different context.”

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Renault did not provide financial details on the sale, but said the deal included an option to buy back Avtovaz’s stake over the next six years. Trade and Industry Minister Denis Manturov indicated to Russian media last month that the Avtovaz deal could be closed for a symbolic ruble.

Ministry official Denis Pak told state television that the deal will allow Avtovaz to continue making the design of Renault’s Duster passenger cars, now called Lada, and that the new operation in Moskvich is likely to produce cars this year.

Sale removes Renault from the band that Western companies face when they determine whether to withdraw from Russia and endure the blow to their income. But continuing to work in Russia after the invasion might risk damaging the reputation of companies with customers. With a view to avoiding unemployment, the Russian government has urged reluctant foreign investors to either resume operations or sell them to anyone who wants to.

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Renault’s announcement came the same day McDonald’s said it is moving to sell its Russian business, which includes 850 restaurants that employ 62,000 people. The fast food giant did not name a potential Russian buyer, but said it would seek one that will hire its employees and pay them until the sale is closed.

The new Russian owners taking over Renault’s business will face a shortage of imported parts for cars, especially electronics. Russia’s auto manufacturing sector relies heavily on international supply chains disrupted by sanctions during the war, while deliveries from abroad have become more difficult and expensive.

The NAMI research institute has some experience developing luxury cars used by Russian leaders, including President Vladimir Putin, but on a much smaller scale than the sprawling Soviet-era Avtovaz factory, where Russian and foreign investors have struggled for decades to to make cars for the mass market profitable.

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Last year, almost half a million vehicles were sold in Russia under the Renault and Avtovaz brands.

Moscow mayor Sobyanin outlined ambitious plans for the resurrected Moskvich brand on his blog, saying it would start with traditional engines but produce “electric cars in the future” in a partnership with Russian truck manufacturer Kamaz.

Sobyanin said the city was motivated by job retention but stopped ruling out staff cuts, saying only that “we will try to have the majority of staff work directly in the factory and for its subcontractors.”

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