April 22, 2014 / 1:25 PM / in 4 years

Weak rouble prompts Renault to pause plans for Russian van production

MOSCOW, April 22 (Reuters) - Renault has frozen plans to produce vans with Russian truck maker ZIL due to a weakening of the rouble, a spokeswoman for the French carmaker said on Tuesday.

Last year ZIL signed a preliminary agreement to assemble Fiat and Renault vans at a Moscow factory, a source close to ZIL said at the time.

“Renault was in negotiations with ZIL about production of LCV (light commercial vehicle) cars,” a Renault spokeswoman said on Tuesday via email. “Due to the weakening of the (rouble) Renault (has) frozen this project” and is looking at trying to find a solution to making the project profitable, she added.

Russia’s declining rouble has been a double-edged sword for automakers, which benefit if they are highly localised - meaning they source the majority of the parts and assemble the car in Russia. The falling rouble makes these cars more competitive against more expensive imports.

However, the damage to consumer confidence from the political instability that has caused a plunge in the currency is expected to hurt all automakers.

The rouble has fallen nearly 8 percent so far this year against the dollar owing to a stand-off between Moscow and Kiev and Russia’s decision to annexe Crimea in March. The currency has fallen 18 percent since the start of 2013.

Renault is studying opportunities to produce LCVs locally in Russia, the spokeswoman said, and ZIL’s plant remains one of the possible manufacturing sites though no investments have been made as yet.

Russia’s Vedomosti newspaper earlier reported that both Renault and Fiat may drop the plans to assemble vans at ZIL.

The factory planned to assemble 50,000 vehicles per year, including 25,000 Renault Master vans and 25,000 Fiat Ducato vans, starting from early 2014, the source close to ZIL said last year.

Fiat declined to comment on Tuesday. ZIL did not immediately respond to a request for comment. (Reporting by Megan Davies; Editing by Sophie Walker)

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