It’s getting lonely for Putin’s auto industry: The Renault group is completely separating its Russian business. This means that the cult cars from Lada, which have just been greatly improved with Renault technology, are likely to fall back to the level of the Soviets.
German manufacturers such as VW and BMW have long left Russia, and now the manufacturer with the greatest involvement in the country is following suit. The Renault-Nissan Group is selling both its entire stake in AvtoVaz (Lada) and its other Russian activities with the Lada and Renault brands.
For the French, this is a bitter loss. The “Automobilwoche” reports: “Two weeks ago, the group estimated the need for depreciation at around 2.2 billion euros. Renault put the total value of the Russian activities, including the plant shares in AvtoVaz, at 2.195 billion euros at the end of 2021.”
Renault can get its shares back within six years by right of first refusal. However, it is unlikely that this will happen. Because Russia’s government had already made it clear that in this case all new investments made by Lada would have to be paid for. In addition, the country with the Ukraine war is likely to be recommended as a trading partner for years to come only for those countries that have not imposed sanctions; India or China, for example.
The “Automobilwoche” writes: “The majority stake in AvtoVaz of 67.69 percent, the manufacturer of the Lada brand, will be given 100 percent to the engine developer NAMI (National Institute for the Development of Automobiles and Engines), Renault explained. Which The consequences of this separation, especially for Lada, remained uncertain at first. So far, the brand has planned to further modernize its portfolio with the help of Renault technology and to increasingly sell new models in western countries.”
Every fifth new car in Russia is a Lada. This makes Lada the market leader and the pride of the Russian car industry. But that should be over now. Because it was only through the entry of Renault that engine technology, production quality and design of the brand were at least somewhat brought to European level.
If the technology input is missing due to the break with Renault and the sanctions from the West, Lada not only has to reorganize and regionalize its supplier structures, but is also likely to fall back massively technically. This not only jeopardizes all export dreams, but also the satisfaction of customers in their own country.
The state news agency Interfax reports that they will continue to build “the complete Lada product range” and offer maintenance and service for Renault vehicles. Both seem doubtful, at least in the long term, because the sanctions mean that Lada is unlikely to be able to secure all the parts it needs.
Cars like the Lada Vesta with Renault input were not really successful in Germany, but they were significantly better than the old Kalina or Priora models. They were horribly processed and below average in almost every respect – engines, efficiency, safety, chassis, design. Only the off-roader Niva has cult status in Germany and is considered a robust classic, assuming extended rust prevention. However, it will no longer be possible to import it, nor will the quasi-successor Niva Travel.
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China does not participate in sanctions against Russia. Basically, it could be interesting for one of the car companies like Geely, Chery, BAIC or SAIC to build cars in cooperation with Russia. The Chinese would then probably grab the market shares that Volkswagen, Hyundai or Toyota had so far. Technically, China’s automakers are hardly inferior to western ones anyway.
But after some back and forth, Russia’s Ministry of Economic Affairs recently said that an entry by the Chinese would “not be discussed”. The ambitions of China’s manufacturers in western car markets could also stand in the way of this. Car market expert Jochen Siebert from JSC Automotive in Shanghai is skeptical about new Russian-Chinese cooperation. Chinese manufacturers are just as affected by the drop in sales in Russia as those from the West. Otherwise, China would probably have more to lose than to gain in the rather small Russian car market: “Geely has announced that the withdrawal from Russia is being considered for fear of damage to its image in Western countries and also for fear of secondary sanctions. Geely in particular is primarily supplied by western suppliers. In addition, the currency risk certainly plays a role, ”said Siebert to FOCUS Online.
With 1.68 million vehicles sold (2021), the Russian car market is not particularly large. Its importance for the German car manufacturers is much smaller than in Europe, the USA or China. Accordingly, it was easy for Volkswagen, Mercedes, BMW and Co. to cease their activities in Russia after the start of the Ukraine war. Of course, they now have to write off investments, but that doesn’t threaten their existence.
It would be completely different if – for example in the event of a Chinese attack on Taiwan, which some political observers fear – the West would also impose sanctions on China and thus put industrial partners under pressure. For Daimler, VW or BMW, an exit from the Chinese market would probably immediately threaten their existence. This is especially true for VW, which has been doing excellent business with the Chinese government for decades and is even the market leader. VW and other manufacturers have already been hit hard by the consequences of China’s corona policy, which is stalling the economy with months of lockdowns.
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