* Renault-Nissan alliance to take direct control of AvtoVAZ
* Group aims for 40 per cent of Russian auto market
* Development of Lada brand a key priority
* AvtoVAZ debt restructured under agreement
By Sonia Elks and Megan Davies
MOSCOW, Dec 12 Renault-Nissan
finalised a long-awaited deal to take control of Lada-maker
AvtoVAZ as it looks to snatch market share from rivals
in Russia by taking the boxy cars upmarket for a rising middle
Carlos Ghosn, leader of the Franco-Japanese alliance who was
in Moscow to sign the agreement, said the deal deepens a
four-year partnership it has had with AvtoVAZ, hoping to tap
demand for new cars from Russians with growing incomes and
Reviving the Lada brand - still Russia's market leader - is
a top priority for Ghosn, who says it is expected to lead the
group's growth plans.
AvtoVAZ only survived a 2009 slump with the help of a state
bailout and its clunky saloons, with a reputation for breaking
down, are often the butt of jokes.
"Without any doubt, the Lada brand will be in the short term
and the long term the largest brand in Russia for the alliance,"
Ghosn told Reuters. "We are here to strengthen the brand and
give it everything it needs."
Ghosn said he wanted Lada to be competitive at the bottom
end of the market but also wanted to move the marque into higher
price brackets. Two new Lada models, the Largus and Granta, have
already attracted high demand and the company is still trying to
deliver six months' worth of orders, the group said.
Ghosn expects the newly-created venture to capture 40
percent of Russia's market by 2016, up from 30 percent, as
Renault-Nissan contributes technology and product knowledge to
Lada while benefiting from AvtoVAZ's manufacturing base.
"Russia is poised to become the largest auto market in
Europe by 2015," Ghosn told a news conference on Wednesday.
The group will be competing against several foreign makers
which have been investing in Russia, such as General Motors
, Ford, Fiat and Volkswagen.
Russia's car market has been growing rapidly on the back of
a rise in disposable incomes and an expansion of the country's
middle class, to between 15 and 30 million from just 1 million
in 1999, according to recent research by Sberbank.
Car sales in Russia grew 40 percent last year to more than
2.6 million vehicles, recovering most of the ground lost after
halving in the post credit-crunch slump of 2009.
Growth has been flattening out, but overall sales for the
year look set to reach around 2.9 million and Ghosn expects
yearly sales to reach 4 million at some point in the 2020s.
Analyst Vladimir Bespalov at VTB Capital doubted the new
alliance would achieve a market share of 40 percent in the face
of increasing competition, but saw around 35 percent as
Under the deal, first announced in May, Renault-Nissan will
invest 23 billion roubles ($742 million) to take control of
AvtoVAZ via a 67.13 percent stake in a joint venture with
state-owned holding group Russian Technologies.
The venture, to be completed by mid-2014, will own 74.5
percent of AvtoVAZ. Russian Technologies will own 32.87 percent
of the joint venture.
AvtoVAZ's debt to Russian Technologies will also be
restructured under the agreement. The Russian manufacturer will
sell non-core assets to pay 8 billion roubles in loans. A
remaining 46 billion interest-free debt is being extended and
will be repaid by 2032.
As part of the agreement, Renault-Nissan will have eight
seats on a board expanded to 15 members from 12.