Wednesday, March 23, 2022

Renault resumes car production in Russia as rivals withdraw....The French government is the major shareholder

Renault resumes car production in Russia as rivals withdraw

The French carmaker had suspended production in February, citing logistical problems. The decision to resume activity is backed by the French government, Renault's main shareholder.

French carmaker Renault resumed operations at its production facilities in Moscow on Monday, a move that comes as other international companies flee the Russian market over the country's invasion of Ukraine.

A company spokesperson confirmed the reopening to news agency Reuters. Renault had suspended some operations at its assembly plants in late February due to component shortages caused by logistical bottlenecks, according to reports from local units.

The company did not specify at the time whether the supply chain issues were due to the war in Ukraine. But sweeping Western sanctions against Russia have further damaged supply chains at a time when automakers are already struggling to get hold of the semiconductor chips used in many parts of car production. Recent sanctions include a ban on semiconductor exports to Russia.

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Renault did not indicate how long the plant, which produces the Renault Duster, Kaptur and Arkana models, would stay open.

"The situation with components supply is unstable and changing, we prefer not to make any predictions," a spokesperson for Renault Moscow told Reuters.

Renault reopened its plant at a time when many international companies were shuttering their business in Russia due to sanctions and public pressure linked to the country's invasion of Ukraine. Over 400 companies, including Apple, Coca-Cola, and McDonald's, have reduced or halted operations in Russia since the war began, according to researchers at Yale University in the US tracking the trend. Foreign carmakers like Germany's Volkswagen and Japan's Toyota have also suspended production and exports. 

Infographic: the largest international companies active in Russia by revenue in 2020

Renault has chosen to remain active in Russia for now while complying with international sanctions, sources close to the matter told Reuters. The decision had the backing of the French state, Renault's main shareholder, the sources said.

Since 2016, Renault has had a controlling two-thirds stake in Russian carmaker Avtovaz, making it more exposed than its rivals to the Russian market. Over 36,000 people in Russia work for Renault. The country accounts for 8% of its core earnings, according to Citibank.

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The French firm entered Russia in 2007, at a time when the car market there was booming. Avtovaz began as a state-owned manufacturer under the Soviet Union. Its Zhiguli and Lada brands have strong associations with the country's communist regime.

Lada, which produces primarily for Russia and its former Soviet neighbors, accounted for 21% of the domestic car market in 2021. Renault's controlling stake highlights the difficulties faced by the West as countries there try to isolate Russia economically.

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While operations at Renault's Moscow plant have resumed, Avtovaz said Monday that it is halting some production at its plants in the Russian cities of Togliatti and Izhevsk due to a shortage of electronic parts.

Many Western companies that continue to operate in Russia are under increasing pressure to suspend their business activities there. In a speech streamed to protesters in the Swiss capital of Bern on Monday, Ukrainian President Volodymyr Zelenskyy criticized Swiss consumer goods company Nestlé for continuing to operate in Russia. Nestlé countered that it had "significantly scaled back" its business there except for "essential products."

The Kremlin has threatened to seize and nationalize the assets of foreign-owned companies that do not resume business in Russia.

Edited by: Hardy Graupner

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