“We remain and will remain in compliance”… Not another word. At Renault, communication is more cautious than ever as the war in Ukraine poses a considerable risk to the activities of the French car manufacturer in Russia. Not least, since since the takeover of Avtovaz, Renault controls no less than a third of the local market.
Renault isolated…
Yes, but by going to war with Ukraine, Vladimir Putin has drawn the wrath of the West and many multinationals have decided to leave the country, often outbidding the sanctions put in place. Strangely, Renault did not flinch even though its largest shareholder, the French state, is committed to the city and the world in the standoff with the master of the Kremlin, promising him a cascade of economic sanctions.
Officially, the French car manufacturer has made the safety of its fifty or so expatriates in Russia its top priority. The two Avtovaz factories are currently shut down due to lack of supplies. The group hopes to resume production on March 26. Above all, Renault is determined to continue its activities in Russia. “The worst thing would be to leave the country… We could never come back there again”explains on condition of anonymity, an internal source.
It would be a disaster for the Frenchman who has invested no less than two billion euros in the recovery of Avtovaz and who was about to start a new phase in his strategy with the arrival of three new models.
For Luca de Meo, who has led Renault since July 2020, Russia had to move from the status of a high-volume market to a high-profit market. With 500,000 cars per year, Russia was Renault’s second volume market, but was far behind in terms of profits (250 million in 2021). With the arrival of a new range, Luca de Meo wanted to implement his “pricing power” strategy (ability to raise prices) and thus increase profitability per car sold. Given the volumes sold, the potential looked promising.
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The triggering of the invasion of Ukraine was decided just a few weeks before the presentation of the new models. A chance for Renault which thus avoids the disaster of a communication operation which would have been eclipsed by the war.
The Russians indirectly threaten Renault
But what to do now that Russia is now doomed to scorn by Western powers? How long can Renault dodge the question of its moral compliance with the bellicose regime in Moscow? How long will the French government preserve the former administration from such an obligation? There is actually another risk: that the Russian authorities themselves take over Avtovaz in retaliation.
At Renault, it is assured that the Russians lack the skills to continue the activity. Even in the event of recourse to the Chinese ally, which has all the skills in terms of industrial engineering, the handover time poses too great a risk for operational continuity.
In addition, Vladimir Putin holds Renault in high esteem for having been able to turn the Lada manufacturer around and enable it to move from the Soviet era into the 21st century. But Renault knows how unpredictable the Russian president is. Moreover, the Russian government has already warned foreign companies in thinly veiled allusions to nationalizations.
The boss of Renault Russia plays diplomacy
Nicolas Maure is one of the centerpieces of Luca de Meo on site. The boss of Renault Russia, who arrived in 2016, had been dubbed, unlike his predecessor, by Vladimir Putin’s entourage, starting with Serguei Chemezov, the boss of Rostec, a former KGB member and very close to the Russian president. Rostec holds 32% of the capital of the main holding company of Avtovaz and acts as the guarantor of Putin’s stranglehold on the national car manufacturer. Nicolas Maure must play the diplomat while racking his brains to solve the supply difficulties of his factories.
For Renault, the objective is to continue operations, despite the war, the sanctions, the contradictions of its own shareholder, and the pressure of public opinion in order not to lose its footing in a major market. While the group is emerging from a deep managerial, financial and strategic crisis, and the recovery plan launched by Luca de Meo is beginning to produce its first virtuous effects, no one at the head office in Boulogne-Billancourt only envisages this ” Russian campaign” ends with a Berezina…