The Alliance sold 878,990 cars in Russia last year – including 578,387 Ladas. With a market share of nearly 33%, Russia is now the Alliance’s third largest market after China and the United States.
The Renault-Nissan Alliance and Russian Technologies are creating a joint venture that gives the Alliance an indirect majority stake in Avtovaz, Russia’s largest automaker, according to a memorandum of understanding just signed in Paris.
The Alliance and Russian Technologies – a state owned company – will contribute their existing ownership in Avtovaz to a joint venture that will control Avtovaz, maker of the much laughed at Lada. Renault-Nissan plans to invest $750 million, which will give the French-Japanese car group 67.13% of the joint venture by mid 2014, if the deal closes. The joint venture will then hold 74.5% of Avtovaz.
Total auto industry volume in Russia last year was 2.65 million vehicles, including light commercial vehicles. Volume in 2012 is expected to be 2.9 million units. The economy went through a bubble and subsequent collapse a few years back, and Lada has been steadily losing share all through the recession.
Sales in the BRIC countries (Brazil, Russia, India and China) have increased four-fold in the past ten years and now account for 1/3 of car sales worldwide. The Alliance sold 878,990 cars in Russia last year – including 578,387 Ladas. With a market share of nearly 33%, Russia is now the Alliance’s third largest market after China and the United States.
Renault, which purchased 25% of Avtovaz in 2008 and then helped it survive the Great Recession, will invest about $300 million in the joint venture. Nissan, which does not currently own a stake in Avtovaz, will invest about $450 million. Renault and Nissan will make periodic payments through 2014.
As part of the deal, Russian Technologies has agreed to restructure its outstanding loans with Avtovaz of approximately RUB7 billion ($238 million) with an anticipated sale of Avtovaz’s “non-core assets” used to repay part of Russian government’s loans. The remainder of RUB46 billion (US$1.56 billion) of interest-free debt is being extended beyond its current maturity date. This, allegedly, gives Avtovaz a strong balance sheet with no immediate liquidity constraints.
“Today’s memorandum is the latest step in an expanding collaboration that helps modernize the leader of Russia’s auto industry,” said Renault-Nissan Alliance Chairman and CEO Carlos Ghosn.
The Renault-Nissan Alliance will perform financial, legal and environmental due diligence during the coming months. The parties expect to sign definitive agreements and close the transaction by the end of 2012, subject to regulatory approvals.
The new agreement comes a month after Russian Prime Minister Vladimir Putin inaugurated a $525 million assembly complex at the Avtovaz Togliatti factory, adding capacity of up to 350,000 cars per year. With the new facilities, the factory has a capacity of almost 1 million cars annually.
Renault, Nissan and Lada are launching new vehicles that will update all core Lada models and launch new cars across the 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.
In January, sales of passenger cars and light commercial vehicles in Russia were 154,400, up 20% from a year ago. Avtovaz, which has seen decreasing its sales for three months – was down by 21% to 29,000 cars in January – although it remains the leader in the Russian car market.
Ford became the first foreign automaker to start producing cars in Russia back in 2002.
In second place is by Kia – 11,000 cars sold (+38%). Third place belongs to Renault, which increased its sales by 40% to 10,900 cars. Nissan sold 10,800 cars (+7%). Hyundai sold 10,200 cars ( +86%) andis in the fifth place. Top Ten best selling brands in January also included Chevrolet (9,700 cars, +33%), Volkswagen (9,300 cars, +118%), Toyota (8,000 cars, +26%), Ford (6,500 cars, +80%) and Daewoo (4,800 cars,+ 4%), according to consultancy Research and Markets.
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