Weekly Brief: Renault’s Russian Woe Warns of Dealing with Autocratic Regimes

Renault has indefinitely suspended all industrial activities in Russia following a direct call from Ukrainian President Volodymyr Zelensky to boycott Renault vehicles worldwide.

The automaker’s Moscow plant, birthplace of the almost half a million vehicles that it sold in Russia last year, is now shuttered. Renault stopped short of announcing a permanent retreat from the Russian market last week but the writing appears to be on the wall. The carmaker says that it plans to take the value of its $2.4Bn worth of assets in Russia as a write-down and will assess all available options for its majority stake in Russian carmaker AvtoVAZ, maker of the Soviet-era icon Lada.

This is a huge blow for the Renault Group. Russia is its second largest market, second only to France. When other carmakers pulled out of Russia over the past decade, Renault doubled down. Its business there is vital to a company that was rocked by internal discord following the ouster of former CEO Carlos Ghosn in 2018. Some still question if Nissan and Renault ever fully mended. CEO Luca de Meo seemed to have the company back on track, reporting its first profits in years in 2021 but that recovery is now in serious jeopardy.

Forty percent of Renault’s market value has disappeared since Russia attacked Ukraine. The write-off for its Russian assets is worth about a third of its overall market value. Last week Renault downgraded its financial outlook for 2022 from an operating margin of 4% to 3%. Its 45,000 employees in Russia may soon be out of work. Whether the company, already in a tenuous position, can weather this storm is uncertain.

How Russia will replace its deficit of half a million vehicles a year is also unclear. Following Renault’s decision to suspend operations at its Moscow plant, Russian state media announced that Russia will reopen the Renault plant this week, with or without Renault’s permission. Seizing a foreign company’s private property without due cause is a questionable move; certainly no more questionable than attacking a sovereign nation but, even if Russia does force the doors open, it’s unclear that it could actually get the factory up and running.

Car factories are like vast computers these days, built on a complicated interplay among humans, machines, artificial intelligence, algorithms and more. Even if Russia gets people into the Renault factory, Renault has all the codes. Then even if Russia can get the codes, car parts will be another challenge. Renault was already struggling to get parts into Russia to open its plant back up since the start of the war. China could help fill the gap but that won’t happen overnight and China is walking a fine line between trying to respect its alliance with Russia and maintain smooth relations with the West.

Renault’s woes could be taken as a cautionary tale for all those carmakers ramping up activities in China. If the latter is emboldened by Russia’s move on Ukraine to pull something similar in Taiwan, how will carmakers react? Is this an if or a when?

In other news last week, Ford rolled out a new advanced driver-assistance feature called BlueCruise. The system functions similarly to General Motor’s Super Cruise and allows for hands-free driving on approved, divided highways across America. BlueCruise is only available on new models of the F-150 and Mustang Mach-E electric SUV for now but Ford plans to expand availability in the coming months.

Similarly, Volkswagen updated its ID software to generation 3.0, with its most advanced driver-assistance features yet. The new ID features Park Assist Plus with Memory function so that the car can learn to repeat your routine parking jobs, without a human hand. It also features Travel Assist with Swarm Data so drivers can harness information from other ID vehicles to get up-to-date insights on the roads they’re traveling. Paul Myles has the details.