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Renault CEO says leaving Russia will complicate automaker’s comeback

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Renault’s Russian partner AvtoVAZ which is controlled by Renault and produces the Lada brands, said on Thursday that it would manufacture new models without imported components and would work to rebuild its supply chains. It imports about 20 percent of its parts and raw materials. 

A decade ago, major automakers saw Russia as a promising growth market with potential to be among the world’s 10 largest vehicle-buying nations.

The latest sanctions, and earlier measures imposed after Russia’s 2014 annexation of Crimea, have ended that hope for now.

A significant part of Renault’s turnaround strategy relied on merging its low-cost brand Dacia and Lada into a single business unit. Lada’s vehicles were to be built using the same platform as Dacias to increase synergies.

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Lada was also part of Renault’s cost-cutting plan and its major push into the compact segment from small cars. A source close to Renault said Dacia will remain profitable even without the economies of scale from Lada.

“We think this strategic move will shift the attention of investors into the core operations of Renault, which have been largely restructured over the past years,” JP Morgan analysts said in a note.

Credit Suisse analysts said that a Russian exit for Renault would be a better option than a “wait and see” approach, even if it comes at a cost for the company.

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