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Manufacture of Renault vehicles in Russia
Photo: imago stock&people / imago/ITAR-TASS
Close cooperation with Western car companies has long been one of Russia's economic success stories.
The Kremlin had brought almost all major foreign car manufacturers into the country with carrots and sticks – massive state subsidies combined with the obligation to set up plants in Russia.
In Kaliningrad, Saint Petersburg, Kaluga, Moscow and elsewhere, the corporations set up modern production facilities - and numerous suppliers settled in the surrounding area.
The Kremlin even entrusted the fate of the former flagship of the Soviet auto industry to foreign companies: Renault and Nissan were allowed to join the Avtovas Group, the Lada manufacturer.
What will become of the giant work in Tolyatti?
However, it is completely unclear whether this cooperation can be continued in the future.
French carmaker Renault has announced that it will suspend its industrial activities in Russia because of the war in Ukraine.
Renault's own plant in Moscow immediately stops production.
Many of the more than 5,000 Renault employees in Russia are affected by the decision.
The group left the future of its stake in Avtowas open.
The company said the company was “examining the possible options, but also taking into account “the current environment” and would act “responsibly with regard to the 45,000 employees” of the Lada manufacturer.
Avtovas' main work is in Tolyatti on the Volga.
The city was built around the newly created factory in Soviet times and is still dependent on the largest employer in the region.
Western corporations active in Russia face uncomfortable weeks and months: On the one hand, they have to comply with Western sanctions because of Russia's invasion of Ukraine.
On the other hand, they could become the target of counterattacks by the Russian leadership in Russia.
Many Western managers fear that production facilities will be expropriated and nationalized.
Renault in crisis?
As a result of the decision, Renault lowered the forecast for the group's operating margin in the current year to around three percent.
Previously, the target had been at least four percent.
Renault had made a record loss of 8 billion euros in the corona crisis in 2020.
The pandemic amplified existing homegrown problems.
At the height of the crisis, Renault was granted a state-backed credit line of five billion euros.
The company had taken four billion of this and already paid back one billion.
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