Lada halts production as sanctions cripple parts supply Business

Lada was forced to halt car production after sanctions prevented the Russian brand from getting enough parts.

The company is closing factories in Moscow, Togliatti and Izkevsk amid a rush to secure computer chips.

A spokesperson said: ‘We are monitoring the ongoing situation very closely.

The cars – which date from before the fall of the Soviet Union – are renowned for being cheap and simple to repair, but also basic and unreliable.

They have achieved a cult following in Britain, as well as being the butt of many jokes, with around 300,000 sold in the UK since the late 1970s.

The brand’s owner, AvtoVaz, has become increasingly dependent on Western parts since the Cold War. AvtoVaz is controlled by French automaker Renault and uses many of its designs for cars.

The closure of its Moscow plant, which manufactures Renault models, is initially scheduled until March 18, while the Togliatti and Izhevsk sites will be shut down for two days.

But without parts from Europe, AvtoVaz will have to source components from other sources or scrap designs and build its own supply chains. It could take months or years without access to European or American parts.

Renault will face its own problems following the break. Russia is the French company’s second largest market after France and accounts for almost an eighth of its sales.

A minority stake in AvtoVaz is held by Rostec, a Russian state-owned company that manufactures weapons and medical technology. Its chairman is Denis Manturov, Russian trade minister, while Sergei Chemezov – a close ally of President Vladimir Putin – is its managing director.

Ratings agency Fitch said if Renault lost AvtoVaz it could hurt the company’s finances and mean it spends two years burning savings while trying to recover.

AvtoVaz’s sales rose 10% last year to €2.9bn (£2.4bn) as the company was able to raise prices amid a global shortage of computer chips.

Automakers around the world are struggling to get the computer chips they need to build engines in sufficient numbers to meet demand.

Nine-tenths of cars made by AvtoVaz remain in Russia, with former Soviet states buying most of the rest.

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This notice was published: 2022-03-10 14:40:09

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