Paris - Renault is considering an ownership transfer of its majority-held Russian venture AvtoVaz to a local investor as a way to exit the country, according to people familiar with the matter.
A transfer, currently the preferred option, would help free the French carmaker from legal responsibilities to the Lada-making Russian business and its 45 000-strong staff, said the people, who asked not to be named because the deliberations aren't public. The move is among options on the table after the carmaker last week said it was suspending industrial activities.
No decisions have been reached and other possibilities could emerge, the people said. How Renault's wholly-owned factory in Moscow would fit into the plan is unclear as yet. The French carmaker would be unable to make the transfer of its 68% stake in AvtoVaz to the other shareholder, Rostec State, because the Russian partner is under sanctions, they said.
Renault last week halted operations at its Moscow plant and said it's assessing available options for AvtoVaz. The manufacturer valued the business in Russia - its second biggest market - at 2.2 billion euros (R35.6 billion), including goodwill, at the end of last year.
The decision put Renault among a growing list of companies pulling back from Russia after President Vladimir Putin invaded Ukraine. O
Renault is the most exposed global carmaker to the Russian market, which has raised concerns among investors and led to credit rating companies cautioning on its prospects. S&P Global on Tuesday kept its negative outlook on the company.
"Although Renault is exposed to Russia because of its large operations there, we are more concerned about its capacity to maintain sound performance in light of likely supply disruptions, higher input costs, and reliance on the European auto market, which could be hurt by the Russia-Ukraine conflict," it said in a report.
Renault's AvtoVaz makes Russia's top two best-selling cars, both carrying the Lada brand which has about a fifth of the local market. Renault got about 10% of its revenue from Russia last year and AvtoVaz had a profit margin of 8.7%, far higher than the 0.6% achieved by the group's automotive division without the venture, according to its latest annual report.
As car factories in Russia struggle to produce vehicles due to a lack of imported parts, the venture will start burning through cash. In 2021, AvtoVaz paid out 393 million euros in payroll costs, the report said. Net financial debt stood at 597 million euros.
Renault last week revised downward its financial outlook for this year on the Russia decision and said it would lead to a writedown in the first-half earnings statement for the value of the Russian business.