Renault-Nissan Alliance to gain control of Russian AvtoVAZ by 2014

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Conveyor system of AvtoVAZ.

AvtoVAZ factories will soon add Renault and Nissan to the production schedule. (Photo Credit: Public Domain/Peter09/Wikipedia)

In 2008, the Renault-Nissan Alliance paid $1 billion for a 25 percent share in former General Motors partner AvtoVAZ, Russia’s largest automaker. By 2014, the European-Japanese alliance expects to own a majority share of the Togliatti-based automaker, reports Automotive News. The companies have agreed to pay AvtoVAZ’s Russian stakeholders approximately $750 million over the next two years to obtain control.

$1.5 billion debt restructuring included

A major provision of the agreement between Renault, Nissan and AvtoVAZ, is that Russia’s state-owned Rostekhnologii conglomeration must restructure $1.5 billion in debt currently owed by AvtoVAZ. Once the deal is completed in 2014, the Renault-Nissan Alliance will possess a major foothold in the expanding Russian automotive market, which experts predict will soon surpass Germany as the largest market in Europe.

Renault-Nissan CEO Carlos Ghosn sees the AvtoVAZ merger as “the latest step in an expanding collaboration that helps modernize the leader of Russia’s industry.”

Concerns of mismanagement

There are a number of industry analysts who feel that Renault should approach an expanded relationship with AvtoVAZ cautiously.

“It should by no means be taken for granted that the deal will progress smoothly to its conclusion in 2014,” said London-based industry analyst Tim Urquhart of IHS Automotive.

Part of the perceived problem is that Urquhart noted that the first Renault-derived AvtoVAZ vehicle, a Largus van based on a Renault Logan B0 platform, was only now coming to market.

“Yet behind the scenes, there is little doubt that the relationship between Renault and AvtoVAZ has been fraught with management, financial and legal difficulties.”

Investors involved in the merger are concerned that the volatility of the Russian auto market looks to continue, since the country still relies heavily upon commodity investments, the value of which has fluctuated greatly in recent years.

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Forty percent in five years

Sales in the Russian auto market plummeted to 1.4 million units in 2009, a product of the global automotive industry collapse. However, 2011 marked a rebound year, with 2.65 million units sold. AvtoVAZ sold nearly 600,000 of those last year. Combined with Renault SA and Nissan Motor Co., the limited AvtoVAZ partnership sold 880,000 vehicles in Russia, a 30 percent market share. Within the next five years, the group has its sights on a 40 percent share of the Russian market.

Deal is non-binding

The most recent deal that has been negotiated is reportedly non-binding, yet the three partners are expected to sign a more permanent agreement before year’s end. By mid-2014, Renault and Nissan will own 50.01 percent of AvtoVAZ stock.

Renault-Nissan Alliance to acquire majority stake in AvtoVAZ


The Detroit News



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