Nissan-Renault to take Avtovaz driving seat

The Renault-Nissan Alliance is moving closer to gaining control of Russia's major car maker Avtovaz. It’s creating a joint venture with state corporation Russian Technologies and investment company Troika Dialog to take over the majority interest.

The joint venture will hold 74.5% of AVTOVAZ and the transaction will be complete by mid-2014.

Renault-Nissan plans to invest about US$750 million, which will secure the French-Japanese car group a 67.13% stake in the joint venture. Russian Technologies which currently owns about 21% will favorably restructure the debt of Russia car maker so about $1.56 billion in debt will get an extended payback period. The joint venture will also acquire Troika Dialog’s entire stake of 25.64 % in AVTOVAZ by 2014.

The head of Avtovaz Igor Komarov believes that its partnership with international majors will help the company to diversify its production line.

This year is the year for launching new cars and modernization at Avtovaz,” Mr Komarov told RT. “During the last six months we launched two new cars. By the end of the year we are going to produce our first Nissan cars. And in one year we are going to launch Renault cars as well”.

The agreement comes a month after a $525 million assembly complex in AVTOVAZ’s Togliatti factory was opened, adding capacity of up to 350,000 cars per year.  With the new facilities, the factory has a capacity of more than 1 million cars per year.

New production lines are also expected to bring Avtovaz back on track as its domestic sales of Lada cars fell 14% in the first quarter. This led to a 9 fold decrease in profits comparing to the same period of 2011.

The Alliance in contrast continues expanding in the Russian market as it sold 40,000 cars in Russia in the first quarter of 2012, boosting its sales more than 50% year-on-year. With a market share of nearly 33%, Russia is the Alliance’s third largest market after China and the US.