The Renault-Nissan Alliance and state corporation Russian Technologies have agreed to create a joint venture that will takeover AvtoVAZ, Russia’s largest carmaker. The deal, which will see Renault-Nissan invest about US$750 million, gives the Alliance an indirect majority stake in AvtoVAZ, maker of Lada cars.
The US$750 million investment will give the French-Japanese car group 67.13% of the joint venture. The JV will then hold 74.5% of AvtoVAZ. The transaction is expected to be complete by 2014.
Renault has a relationship with AvtoVAZ prior to this. In 2008, it purchased 25% of AvtoVAZ and helped steer the Russian company in an aggressive turnaround. It will invest about US$300 million in the JV. Japanese partner Nissan, which does not have any stake in AvtoVAZ, will part with US$450 million.
This comes a month after Russian Prime Minister Vladimir Putin inaugurated a US$525 million assembly complex in AvtoVAZ’s Togliatti factory, adding capacity of up to 350,000 cars per year. Now, the factory has a capacity of almost one million cars per year.
Renault, Nissan and Lada are launching a product offensive that will update all core Lada models and launch new cars across three brands, including five models from the newly inaugurated facility. In addition to Togliatti, the three brands operate plants in Moscow, St. Petersburg and Izhevsk.
With everyone’s full focus on China, Renault-Nissan is making a good move in deepening its roots in Russia. The former USSR is the fastest growing economy in Europe and has a growing population of upper- and middle-class consumers. More than 10 million Russian households already earn more than US$50,000 per year.
Total industry volume in Russia last year was 2.65 million vehicles, including light commercial vehicles. Of this, the Alliance sold 878,990 cars, including 578,387 Ladas. With a market share of nearly 33%, Russia is the Alliance’s third largest market after China and the United States.
I wonder if there are any Lada Nivas still running around in Malaysia.