Renault-Nissan grows Avtovaz stake

Renault-Nissan is to acquire a majority stake in Avtovaz, the Russian state car maker that produces Lada cars. As part of the development, Renault-Nissan will update all core Lada models and launch new cars from all three brands in Russia.

Five models will be built at Avtovaz’s revamped factory in Togliatti, south west Russia, which has a capacity of almost one million cars per year.

The deal will allow Renault-Nissan to take advantage of Russian’s economic strength. It has the fastest-growing economy in Europe and should remain in the forefront for several decades, with car and light van sales expected to grow from 2.65m last year to 2.9m in 2012.

The Renault-Nissan Alliance sold 878,990 cars in Russia last year – including 578,387 Ladas. With a market share of nearly 33 per cent, Russia is the Alliance’s third largest market after China and the United States. However, Avtovaz has been phasing out the so-called 'classic' Ladas that it still builds, such as the venerable 2104 Station Wagon, and its modern car range needs revamping.

Under the terms of the agreement, Renault-Nissan and state-owned Russian Technologies will pool their respective shares in Avtovaz into a joint venture. Then, in 2014, the joint venture will acquire the stake in Avtovaz currently owned by Russian investment company Troika Dialog.

Renault, which already has a 25 per cent stake in Avtovaz, will invest about £185m in the deal, while Nissan, which does not currently have a stake in the Russian firm, will put in about £280m. This will give the French-Japanese car group a 67.13 per cent stake, with Russian Technologies’ stake taking the joint venture to a controlling interest of 74.5 per cent.

Renault-Nissan Alliance boss Carlos Ghosn said the agreement is, “the latest step in an expanding collaboration that helps modernise the leader of Russia’s auto industry. Just as Renault and Nissan will continue their technology transfer to Avtovaz plants, our Avtovaz colleagues will contribute more and more to the Alliance’s multicultural management bench.”

An outline memorandum of understanding was signed today, and the deal is due to be finalised by the end of this year.