PARIS/MOSCOW May 14 Renault is
looking closely at Western sanctions on Russia even though its
carmaking alliance with Nissan appears better
positioned than others to ride out the crisis over Ukraine.
The European Union and the United States have already
imposed economic sanctions on Russia, including some against the
deputy chairman of OAO AvtoVAZ, a Russian carmaker in
which Renault-Nissan has a controlling majority.
The political turbulence has dented economic confidence and
car sales in Russia have fallen this year, but Renault says it
is confident in its long-term prospects.
Nevertheless, Western countries have warned of tougher
sanctions and Renault and other carmakers are looking to see
what impact these could have.
"We are still studying the sanctions regime and exactly what
it means for Renault," said the company lawyer, who asked not to
The United States last month imposed sanctions against
individuals it deemed close to Russian President Vladimir Putin
including Sergei Chemezov, who heads sprawling conglomerate
Rostec which has a stake in AvtoVAZ. Chemezov is deputy chairman
The domestic car market could plunge as much as 15 or 20
percent this year in the event of a full-blown crisis over
Ukraine, according to LMC Automotive, a far bigger contraction
than the 2-4 percent previously forecast.
Other foreign automakers and their Russian partners have
also been evaluating the sanctions threat to their business.
"There is a lot of scenario planning right now, and the risk
profile has taken a step change," said one auto analyst at a
Moscow firm, who asked not to be named.
While the sanctions so far are largely symbolic, he said,
"they do raise the pressure - and with Rostec involved it has
some serious implications for Renault-Nissan."
Chemezov holds no stake in Rostec, which is 100 percent
government-owned. Lawyers have said that in cases where an
individual is sanctioned but not the company they run,
international businesses can still deal with the company,
although it could impact relations.
Renault has played down the impact of U.S. sanctions.
"We're cautious on the short term in Russia in terms of the
economy," Renault-Nissan Chief Executive Carlos Ghosn said while
presenting Nissan earnings this week, "but (there is) absolutely
no concern for mid- and long-term growth prospects."
The sanctions against high-profile Russian figures could
affect other global automakers too.
Lawyers say they can make U.S. companies and nationals
reluctant to have dealings such as business meetings with
GM, whose separate joint venture with AvtoVAZ makes the
Chevrolet Niva variant of Lada's identically named offroader,
said it had no contact with its Russian partner's deputy
"It is our understanding that Mr. Chemezov is on the board
of directors of AvtoVAZ," GM spokeswoman Heather Rosenker said.
"GM has no direct dealings with Mr. Chemezov," she added.
"It is GM's policy to comply with all U.S. and EU sanctions."
Among foreign auto brands, Renault is the most localised,
with about 70 percent of parts sourced from Russian suppliers
last year, according to Moscow auto research group Autostat.
Volkswagen and Hyundai are closer to
50 percent, with Ford, General Motors and Toyota
trailing at 10-30 percent - excluding GM's heavily
localized joint venture with AvtoVAZ.
Buying parts locally brings protection against a weaker
rouble, while avoiding duties and other barriers to imports.
"The carmakers who are the most localized in Russia are the
ones that are growing the most," said Ghosn. "Carmakers who are
importing parts to Russia are suffering."
Renault-Nissan's deeper AvtoVAZ alliance also offers a
degree of hedging against any patriotic swing away from foreign
brands, of which there is no sign yet. A weaker yen is also
reducing some input costs for Nissan and other Japanese
manufacturers, bolstering them against the rouble slide.
But the largest investors may also have more to lose if the
"With Lada, Renault is the biggest producer in Russia, so of
course they are the most exposed," said Erich Hauser, a
London-based analyst with ISI Group.
"If it's a mild crisis, everyone else gets scared and they
are still there, it's fine," he said. "The trouble is that you
can't easily assess how far this might go."
Russia's darkening economic outlook has already long
postponed the country's expected overtaking of Germany as the
region's biggest car market, which some had predicted this year.
Light vehicle registrations fell 4 percent in the first four
months after the market decline gathered pace in April,
according to data from the Association of European business.
Combined Renault-Nissan-AvtoVAZ sales have fallen 5 percent
so far this year, eroding the alliance's market share to 30.5
percent, far behind Ghosn's long-held 40 percent goal.
VW declined in step, while GM tumbled 8 percent. Toyota rose
12 percent and Hyundai 1 percent.
Renault bought an initial 25 percent of AvtoVAZ for $1
billion in 2008 and is increasing this to a 67.1 percent stake
in the holding company, jointly held with Nissan. The holding,
in which Rostec holds the remaining shares, in turn controls
AvtoVAZ via a 74.5 percent stake.
The timing of any further flare-up between Russia and the
West could also prove awkward, with Ghosn's alliance set to
complete the purchase next month, in return for an additional
577 million euro ($794 million) investment.
"They paid quite a lot, then they paid more for the
control," said Moscow-based VTB Bank analyst Vladimir Bespalov.
"So whether they regret it or not, there's no way back."
($1 = 0.7270 Euros)
(Additional reporting by Yoko Kubota in Toyko and Ben Klayman
in Detroit; editing by Anna Willard)