Renault-Nissan, Rostekhnologii JV to Take Over AvtoVAZ

VIENNA – The Renault-Nissan Alliance joins state-owned Russian company Rostekhnologii (Russian Technologies) in a joint venture that will hold a majority stake in AvtoVAZ, Russia’s largest auto maker.

The JV called Alliance Rostec Auto, which is registered in the Netherlands, will serve as a stable, long-term operator of AvtoVAZ, maker of the Lada brand. Renault plans to hold a controlling 50.1% stake by June 2014.

The French auto maker says the alliance will spend RR23 billion ($742 million) by mid-2014 for a 67.13% share of the JV, which then will hold 74.5% of AvtoVAZ.

Renault, which bought 25% of AvtoVAZ in 2008 and then helped the Russian auto maker in its turnaround, will invest RR11.3 billion ($366 million) in the new JV.

Nissan, which previously did not own a stake in AvtoVAZ, will invest RR11.7 billion ($376 million) for a 17.03% share in the JV. Rostekhnologii, which currently controls AvtoVAZ, will hold the remaining 32.87%.

The JV also will buy out the AvtoVAZ shares owned by Troika Dialog Investment.

As part of the deal, Rostekhnologii restructures its outstanding loans to AvtoVAZ, with RR8 billion ($258 million) from the sale of the Russian auto maker’s non-core assets being used to repay part of the Rostekhnologii loans. About RR46 billion ($1.48 billion) of interest-free debt is being extended until 2032, strengthening AvtoVAZ’s balance sheet with no liquidity constraints.

“Today’s historic agreement is a win-win-win for all companies: Renault, Nissan and AvtoVAZ,” Renault-Nissan Chairman and CEO Carlos Ghosn says during the signing ceremony in Moscow. “It is a significant new chapter in an already solid partnership.”

Ghosn will chair the JV’s board, which will concentrate on key shareholder decisions at AvtoVAZ. Renault-Nissan will have eight seats on an expanded AvtoVAZ board of 15 members, up from 12 earlier.

As a result of the deal, Renault and Nissan will take control of the Russian auto maker which, in addition to its main site in Togliatti, owns a facility in Izhvesk acquired from bankrupt auto maker IzhAvto last year.

Renault and Nissan currently own plants in Moscow and St. Petersburg, respectively. Together, AvtoVAZ, Renault and Nissan could account for 40% of all vehicle sales in Russia by 2017.

“At least two-thirds of (the sales) are expected to be Lada-brand vehicles,” AvtoVAZ President Igor Komarov tells WardsAuto. “In 2020, AvtoVAZ will be a multibrand manufacturer with an annual production of more than 1.6 million cars.”

AvtoVAZ this week launched volume production of Nissan’s Almera sedan as its second brand after Lada at the recently expanded Togliatti complex. It will add output of Renault vehicles next year and low-cost Datsun cars in 2014.

Plans call for annual production of up to 70,000 units of the Almera, which was developed specifically for the Russian market. It is powered by a 4-cyl. 1.6L naturally aspirated gasoline engine making 102 hp.

Russian sales of the new model start in February. Pricing is not announced, but Nissan is positioning the Almera as an affordable sedan with the room of a D-segment car for the typical cost of a B-segment model.

The AvtoVAZ-Renault-Nissan alliance sold 817,390 vehicles in Russia this year through November, up 1.7% from like-2011, for a market share of 30.5%. The total figure comprises 494,271 Ladas, 172,610 Renaults, 142,070 Nissans and 8,439 Infinitis.

With the Almera now in production and output of Renault-badged vehicles launching soon, AvtoVAZ also is modernizing the model range of its core Lada brand.

The Russian auto maker began volume production of the Lada Granta low-cost sedan last year. The Largus wagon, which like the Almera is based on Renault’s B0 platform, has been manufactured since April.

AvtoVAZ will add facelifts to the Lada Kalina and Priora models next year, followed in 2014 by Granta hatchback builds.

The auto maker plans to start producing the first completely new Lada models, based on its own platform, after 2015. “The first new models after 2015 will be positioned in the B-segment. The projects involved are the BM-Hatch and the B-Cross SUV version,” Komarov says.

“The AvtoVAZ investment program will amount to about RR150 billion ($4.9 billion) by 2020, including about RR60 billion ($2 million) that AvtoVAZ will finance externally.”

Renault and Nissan have helped AvtoVAZ improve both its production processes and vehicle quality.

“We have changed our collaboration with suppliers, modernized our production facilities and introduced the alliance’s new methods and standards to boost efficiency and productivity for the production of these models,” Komarov says, adding the Russian auto maker is making measurable quality improvements.

“For example, the defects of parts, which we receive from our suppliers, have already decreased tenfold compared to 2009,” he says. “The volume of our warranty work has been cut in half.”

-with William Diem in Paris