Renault-Nissan Takes Over AvtoVAZ, Plans to Revive Lada and Increase Sales in Russia

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With the Eurozone debt crisis stifling new car sales, auto manufacturers are looking elsewhere to make up for lost ground. China may be the world’s largest market but after years of rapid expansion, it shows signs of slowing down.

New car sales in Russia, on the other hand, increased last year by 40 percent to more than 2.6 million vehicles. Even though the rate of increase is expected to cool down, with 2012 sales estimated to be around 2.9 million units, it is still a very interesting prospect.

Add to this a research by Sberbank showing that Russia’s middle class has increased from 1 million in 1999 to between 15 and 30 million, and it’s easy to understand why AvtoVAZ, which owns Lada, the country’s top-selling brand, has been such a hot item for some time now.

Renault-Nissan announced that it has formed a joint venture with Russian Technologies and sealed a deal to become its new owner, with CEO Carlos Ghosn going to Moscow to sign the agreement.

“Russia is poised to become the largest auto market in Europe by 2015”, said Ghosn during a press conference yesterday. “The market is highly competitive and all the major foreign automakers already have operations here. But let’s be clear – we are doing more than building and selling cars in Russia.”

According to the terms of the agreement, which will be completed in mid-2014, Renault-Nissan will invest RUB23 billion (US$ 742 million), gaining control of 67.13% of the joint venture by mid-2014, with the rest being held by Russian Technologies. The joint venture will then hold 74.5% of AVTOVAZ.

Ghosn wants to revive the Lada brand with technology and expertise provided by Renault-Nissan. Production targets for Lada, Renault and Nissan vehicles in Russia by 2015 are set to around 1.4 million units.

“Without any doubt, the Lada brand will be in the short term and the long term the largest brand in Russia for the alliance”, he told Reuters. “We are here to strengthen the brand and give it everything it needs.”

By Andrew Tsaousis