Renault resumes car production in Moscow as rivals cut ties with Russia

Carmaker’s move backed by French government as Nestlé also comes under pressure to withdraw business

The French carmaker Renault has resumed manufacturing in its plants in Moscow, bucking the trend of many other large global companies that have cut ties with Russia over its war on Ukraine.

Renault had suspended production at the plant last month, citing logistical problems after the invasion of Ukraine on Vladimir Putin’s orders. However, Renault’s decision to restart manufacturing has the backing of the French government, which is its main shareholder, according to sources cited by Reuters.

Renault has owned a controlling two-thirds stake in the Russian carmaker Avtovaz since late 2016, after first investing in what was then a fast-growing market in 2007. That means it has larger operations in the country than most other European rivals, with 40,000 local employees, posing a huge challenge as the US, UK and EU governments try to isolate Russia economically.

Avtovaz sold 350,000 vehicles in 2021, making profits before tax of €186m (£156m) for Renault – or about 12% of its earnings that year. Avtovaz started as a state-owned company in the Soviet Union, making cars that became strongly associated with the Communist regime under the Zhiguli and then Lada brands.

While the Moscow plant has restarted, Avtovaz said on Monday it was partially halting production this week at a huge plant in Tolyatti, a city on the Volga river, and another in Izhevsk, a city 500km to the north-east. The halt was caused by shortages of electronic parts, it said.

Carmakers around the world have struggled to source semiconductor computer chips used in everything from car radios to windscreen wipers, and Russian factories are likely to fall further down the queue as its economic isolation deepens. Western sanctions imposed on Russia since the invasion include bans on semiconductor exports.

Several companies from Europe and other rich economies have been forced to write off assets in Russia after government pressure and sanctions.

Authentic Brands, the owner of the Reebok sportswear brand, on Monday said it had “suspended all branded stores and e-commerce operations in Russia”. The brand, which had been highlighted as one of several western labels that had been slow to take action, has about 90 stores in Russia.

Those firms remaining in Russia have come under increasing pressure to halt business there, including the Swiss food and drink group Nestlé. The Ukrainian president, Volodymyr Zelenskiy, criticised Nestlé, which continues to sell “essential” products such as baby food, cereals and some pet foods in Russia, in a streamed speech to thousands of protesters in Switzerland’s capital of Berne on Saturday.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Nestlé has halted sales of “non-essential” items such as coffee pods to Russia, has ceased advertising support and says it does not make a profit on the goods it continues to sell there.

“The fact that we, like other food companies, supply the population with important food does not mean that we simply continue as before,” Nestlé said in a statement.

Some prominent US and UK retail brands are still operating in Russia because they have been unable to force independent franchise operators to close down.

Burger King’s owner, Restaurant Brands International, last week said fast food restaurants were still operating with its brand because its former Russian partner had refused to shut down. Other companies in similar situations include the UK retailer Marks & Spencer and the hotel groups Accor and Marriott.

• This article was amended on 22 March 2022. Avtovaz sold 350,000 vehicles in 2021, not “nearly 2,900” as an earlier version said.

Contributors

Jasper Jolly and Sarah Butler

The GuardianTramp

Related Content

Article image
Renault-Fiat Chrysler merger collapses
French government blamed as €33bn deal to create world’s third-largest carmaker stalls

Julia Kollewe

06, Jun, 2019 @7:10 AM

Article image
France says planned Renault-Fiat merger must protect jobs
Finance minister seeks guarantee no factories will close before any deal is agreed

Jasper Jolly and Rob Davies

28, May, 2019 @9:02 AM

Article image
Fiat Chrysler proposes merger with Renault to reshape car industry
Deal would create world’s third-largest automaker and ‘save €5bn a year’ by sharing research

Sarah Butler

27, May, 2019 @10:13 AM

Article image
Renault to cut 14,600 jobs as part of €2bn cost-saving plan
Restructuring by French carmaker comes as Covid-19 crisis hits manufacturing

Jasper Jolly

29, May, 2020 @7:40 AM

Article image
Renault refuses to remove Carlos Ghosn despite shock arrest
French carmaker Renault out of step with alliance partners Nissan and Mitsubishi

Jasper Jolly, Julia Kollewe and Graeme Wearden

20, Nov, 2018 @11:03 PM

Article image
Nestlé stops production and sales of non-essential goods in Russia
Company bows to pressure from shoppers, activists and political figures to suspend brands

Sarah Butler

23, Mar, 2022 @2:48 PM

Article image
Renault keeps Carlos Ghosn at helm despite financial misconduct charges
Company says all payments to Ghosn between 2015 and 2018 were compliant with the law

Jasper Jolly

13, Dec, 2018 @7:30 PM

Article image
Renault accuses Carlos Ghosn of violating company ethics
Investigation into former boss found ‘questionable practices’, French carmaker says

Jasper Jolly and Justin McCurry in Tokyo

03, Apr, 2019 @6:21 PM

Article image
General Motors looks to sell loss-making Vauxhall and Opel
Potential purchase by owners of Peugeot and Citroën would create Europe’s second-largest carmaker

Rob Davies and Graham Ruddick

14, Feb, 2017 @1:42 PM

Renault on the ramps after margin warning

Renault's chief executive, Carlos Ghosn, is facing his toughest challenge since stepping into the top job in May this year. Shares in the French car maker fell nearly 8% yesterday after it warned late on Wednesday that its operating margin this year would fall from over 4% to "more than 3%".

Mark Milner

18, Nov, 2005 @1:04 AM