The Renault-Nissan Alliance will come together with Russian Technologies in a joint venture to acquire a majority stake in Russian automaker Avtovaz according to a non-binding memorandum of understanding signed in Paris today.
The joint venture aims to accelerate product launches and technology transfers with Avtovaz – maker of the iconic Lada brand that recently ceased production of its 1960s-based ‘Classic’ – to assist the car maker in taking full advantage of Russia’s market; a market that Renault-Nissan says is the fastest growing economy in Europe.
The agreement sees Renault-Nissan invest about US$750 million ($729 million) to give it a 67 per cent share of the joint venture by mid 2014, the expected completion date of the transaction. To fulfil its end, Russian Technologies will restructure its RUB46 billion ($1.5 billion) debt by resolving RUB7 billion ($231 million) worth of outstanding loans to Avtovaz with the proceeds of an anticipated sale of Avtovaz’s non-core assets.
As Renault already owns 25 per cent of Avtovaz, purchased in 2008, its US$300 million ($292 million) investment will be less than the US$450 million ($438 million) Nissan is putting into the joint venture, for a combined result of a 74.5 per cent stake in Avtovaz. Russian investment company Troika Dialog’s entire stake in Avtovaz will also be acquired in the process.
Renault-Nissan believes Russia’s surge in middle- and upper-class consumers should continue into the future with more than 10 million Russian households now earning more than US$50,000 ($48,600) per year and total industry volume in Russia hitting 2.65 million vehicles in 2011. Renault-Nissan expects this volume to increase to 2.9 million units for 2012.
With the Renault-Nissan Alliance selling 878,990 cars in Russia last year – including 578,387 Ladas – it maintains a market share of nearly 33 per cent, helping Russia become the Alliance’s third largest market after China and America.