Avtovaz looks for chip supply alternatives as sanctions against Russia loom

By Piotr Lipinski and Gleb Stolyarov

IZHEVSK, Russia (Reuters) -Russian carmaker Avtovaz, controlled by France’s Renault, is looking to secure alternative supplies of electronic chips in case U.S. sanctions curb deliveries to Moscow, the company’s chief executive said on Tuesday.

Western governments are set to announce fresh sanctions against Russia after President Putin recognised two breakaway regions in eastern Ukraine, with the White House telling its chip industry to be ready for new curbs on exports to Russia.

Should Washington expand the scope of the restrictions, mirroring a previous move against Chinese telecoms giant Huawei, it could stop shipments of chips, computers, consumer electronics, telecommunications equipment, and other items made anywhere in the world if they used U.S. technology.

Similar measures were deployed during the Cold War, when the United States and other Western nations maintained severe technology sanctions on the Soviet Union, crimping its growth.

“Of course we are also investigating possibilities to find alternatives in the case of sanctions,” Nicolas Maure, Avtovaz’s chief executive, told reporters in the Russian city of Izhevsk.

Maure did not say how Avtovaz, behind the Lada brand, secures chips for its car plants in Russia. Russia lacks its own chip production and relies on foreign supplies, including from China, industry watchers say.

A senior Russian auto industry source voiced a concern over how chip delivery times and new pre-orders could be affected.

“We don’t understand how sanctions (if implemented) could impact the industry but hope that there will be no war – it will complicate the existing situation,” the person told Reuters.

Russian carmakers, like other producers globally, are struggling to secure chips amid pandemic-related bottlenecks and increased demand elsewhere.

Sales of new cars in Russia are forecast to slow to 3.3% this year from 4.3% in 2021, because of the shortage of electronic components, logistics challenges and higher costs.

Renault, which owns Avtovaz via a 69%-32% joint-venture with Rostec, is carefully following the Ukraine security crisis, the French carmaker’s spokesperson Rie Yamane said, adding it was “premature” to estimate the possible sanctions.

Avtovaz sells over 90% of its production locally, Yamane said, with the rest mainly shipped to Commonwealth of Independent States (CIS) countriesm which include Moldova, Georgia and Kazakhstan. It sources about 80% of its components in Russia.

Last week, Avtovaz reported its 2021 sales rose 10.4% to 2.85 billion euros ($3.23 billion).

($1 = 0.8817 euros)

(Reporting by Piotr Lipinski in Paris, and Gleb Stolyarov in Izhevsk, Russia; additional reporting by Ekaterina Golubkova in Moscow; Editing by Louise Heavens and Emelia Sithole-Matarise)