Renault announces its deal to sell its 68% stake in Russian carmaker AvtoVAZ. It is being sold to state-backed automotive research and development center NAMI. Furthermore, the deal comes with a six-year option to buy back its shares. The ownership of a factory in the center of Moscow will also be transferred. It has been making vehicles under Nissan and Renault brands for the city’s government.
The financial terms of the deal were not disclosed, however, it is said that the company is selling its assets for one ruble each symbolically. Renault Chief Executive Luca De Meo said, “Today, we have taken a difficult but necessary decision; and we are making a responsible choice towards our 45,000 employees in Russia.”
The option to buy back its stake in AvtoVaz can be exercised by Renault later, over the next six years, can be predetermined. However, the buyback option is not for the Renault factory as it will be merged with AvtoVaz operations. In case the company was to buy out, the price will take into account any investments under NAMI’s stewardship. Renault’s arrangement has been a costly deal to cut ties with Russia. In the past 15 years, Renault has invested billions of euros in Russia.
Cutting off ties
AvtoVAZ sold around 350,000 vehicles, which are around 12% of Renault’s sales. Cyril Meziere, a representative of one of Renault’s unions said, “It’s not good news, but it’s a good solution.” Renault and others have been under pressure to divest from Russia since its full-scale invasion of Ukraine began in late February, triggering waves of Western sanctions aimed at cutting off Moscow from the global financial system. These sanctions have crippled supply chains, making it hard for foreign firms to operate in Russia while also depriving them of buyers for their assets.
Russia’s lower house of parliament, the State Duma, is considering legislation that would allow Russia to nationalize the assets of foreign companies that have exited from the country in response to its invasion of Ukraine. Shell PLC has agreed to sell its Russian retail station and lubricants business to oil giant Lukoil PJSC as part of a broader push to exit its Russian hydrocarbons business in phases. Shell said it took a $3.9 billion posttax charge related to its decision to leave Russia. French banking giant Societe Generale SA said last month that it would exit Russia, selling its operations to one of Russia’s richest people, and taking a more than $3 billion hit to its income.
