Russia’s Sluggish Sales Threaten Renault Strategy

Renault SA has been counting on Russia's fast-growing auto sales to help offset slumping demand in the rest of Europe. But the country's cooling car market is putting that plan at risk, according to Bloomberg News.

The news service notes that Renault's sales in Russia jumped 23% to 189,900 vehicles. The company's 5%-7% margins in that market are among its best in the world, CM-CIC Securities tells Bloomberg. The Paris-based firm says a slowdown in Russia would hurt the company's profitability.

In December Renault and alliance partner Nissan increased their bet on the country by finalizing an agreement to buy an indirect controlling stake in Lada maker AvtoVAZ for 23 billion rubles (€565 million).

But Russian demand, which climbed 11% to 2.98 vehicles last year, is being dampened by rising interest rates and inflation. The Moscow-based Assn. of European Businesses predicts volume will rise 5% this year at best and could drop as much as 5%.

Renault tells Bloomberg it remains confident that Russia's auto sales are on an "upward trend." But Nissan has reduced the workweek at its assembly plant in St. Petersburg to four days from five from Feb. 1 through mid-March, citing the slowing car market.