ECONOMY

Lada Halts Production In Russia Due To Sanctions Over Ukraine Invasion

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The sanctions following Russia’s invasion of Ukraine are showing their toll in local production with Lada halting operations in the Togliatti and Izhevsk pants on March 5, 9, and 11. A spokesperson of AvtoVAZ said that workers will either receive a partial income or take their leave during the production freeze, while those employed in sectors like customer service will not be affected.

AvtoVAZ’ Togliatti plant built on the banks of the Volga River was self-sufficient in the Soviet Union days but the automaker has become increasingly reliant on outsourcing parts in the past decades. As reported by The Wall Street Journal, over 20 percent of parts needed for production including electronic components are coming from outside the Russian borders, making it impossible to continue operations after the country was cut off from global trade. One of the main suppliers is the Romanian plants of parent company Renault, where Dacia vehicles are being produced.

Read Also: Russian Invasion Of Ukraine Could Lead To Second Wave Of Microchip Shortage

According to Renault’s official website, Lada has over 300 dealerships in Russia and is present in over 20 other countries with five families of models (Vesta, XRAY, Largus, Granta, and Niva). In 2021, Lada sold 350,714 vehicles in Russia, which accounts for 21 percent of the country’s new car sales where Lada has been a leading force for over 50 years.

This makes Russia the second largest market for Renault Group behind France, with Lada taking up 12 percent of the French group’s total sales last year, and generating a $181 million profit for the company. Predictably, the war in Ukraine has caused Renault shares to lose 35 percent of their value since last month.

last week AvtoVAZ declined to comment on the impact of sanctions, saying they kept monitoring the situation. However, as long as the war continues things will keep getting worse for people and businesses on a much bigger scale since economies are interconnected. Sources from Russia claim that AvtoVAZ would need months or years to get back on its feet without support from Renault.

Most automakers have temporarily shut down operations in Russia including Hyundai, Ford, and Volkswagen, with the Russian government threatening to nationalize their factories.

H/T to The Drive

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