Renault / VW: De Meo shows more realism than Dis with leaving Russia

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How to double the price of Lada? Fill the gas tank. The quality of Russian cars has improved since this joke – and many like it – was invented in the 1970s. The sales Renault on its Russian assets, including a stake in Lada AvtoVAZ for a token sum, highlights the painful choices faced by Western companies once operating in the country.

Renault boss Luca de Meo has shown a better understanding of political reality than Herbert Dis. The head of Volkswagen caught fire predictable outrage last week called for a “settlement” with Russia. The tide is running against the pedestrian drags. McDonald’s outlined plans to sell on Monday their Russian restaurants.

Renault will transfer 67.7% of AvtoVAZ shares to the Russian State Automobile Research Institute. The French company’s own brand plant will go to Moscow.

Renault has confirmed a write-off of 2.2 billion euros, first announced in March, and said it expects an operating margin of 3 percent this year compared to 4 percent before Russia’s invasion of Ukraine. Renault has the opportunity to buy out businesses over the next six years if political conditions improve.

When Russia invaded Ukraine, markets quickly reduced enterprises with Russian influence. To date, Renault shares have fallen by 35 percent. Production in the country stopped, but Renault continued to pay about 45,000 employees.

Two charts.  First shows the finances of AvtoVAZ.  The share of Renaultautomotive revenue (%) and operating profit (million euros), from 2017 to 2021.  The second chart shows that Renault is worth as much as Nissan’s stake.  Renault against 43% of Nissan Motor shares, from 2017 to 2022.

The outlet relieves this pressure. But Avtovaz was a promising unit with sales and revenue growth until the pandemic began. Using a conservative 10-fold multiple of the performance indicator, a few months ago it would have cost 2.5 billion euros.

Stocks reduce this and more. Renault’s market value, which is less than 7 billion euros, attributes only 350 million euros to the value of its other businesses, excluding the group’s 43 percent stake in Nissan.

De Meo must focus on losing Renault’s reputation as a sick man of the European automotive industry without support from AvtoVAZ. Jokes about rusty old guys are now more relevant for Renault than for Lada cars.

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