Renault’s painful exit from Russia

Renault has ended its majority ownership of Russian car brand Lada, says Bloomberg. The French carmaker will sell its 68% holding in AvtoVaz, Lada’s parent company, for a symbolic one rouble to the state-run Central Research and Development Automobile and Engine Institute. The deal marks the end of a relationship that began when Renault took control of Lada for $1bn in 2007. The firm has retained an option to buy back the businesses within the next six years, but will take a €2.2bn writedown as a result of the sale.

The exit carries one financial benefit: Renault was still paying 45,000 workers in the country, even though production had halted, says Lex in the Financial Times. But there’s no getting around the fact that this will be painful for Renault. AvtoVaz had been a promising division with sales and profits rising until the pandemic struck. Even on a conservative valuation, the subsidiary would “have been worth €2.5bn a matter of months ago”.

Selling AvtoVaz is the culmination of a terrible few years for Renault, but “all might be forgiven” if this crisis makes it rethink its capital allocation, says Stephen Wilmot in The Wall Street Journal. Strip out the value of its 43% stake in partner Nissan and Renault’s shares are valued at just $615m – even cheaper than most carmakers. But new CEO Luca de Meo “seems serious” about shaking the firm up, perhaps by selling part of the Nissan stake to fund the transition to electric vehicles (EVs), or splitting into EV and non-EV businesses.

If he can pull this off, it might “unearth the value buried in the company’s rock-bottom stockmarket valuation”.