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Renault-Nissan takes control of Avtovaz

Red runner: The Renault-Nissan Alliance has said 'da' to a deal to take over Russia's Avtovaz, maker of cars such as the Lada Granta.

Russia’s biggest car-maker now under the control of Renault-Nissan in $750m deal

4 May 2012

THE Russian company that brought you the Lada Niva and Lada Samara in the 1980s and 1990s is about to fall under the spell of the Renault-Nissan Alliance, which will acquire a controlling stake of more than 50 per cent in Russia’s biggest motor company, Avtovaz, by 2014.

The French-Japanese conglomerate has held a 25 per cent share of Avtovaz since 2008 when the Russian company almost collapsed in the global financial crisis, but now it has agreed to up the ante in a joint venture with state-owned Russian Technologies to take over the huge operation with the intention of accelerating production to 1.4 million within two years.

Including Lada – Avtovaz’s major brand – the alliance holds a 33 per cent share of the burgeoning Russian market, which is expected to overtake Germany as Europe’s biggest vehicle market by 2014.

Last year, Russian vehicle sales reached 2.65 million units and is expected the reach 2.9 million this year, thanks to a rapidly expanding middle class.

The acquisition also is expected to shift Renault-Nissan ahead of Ford and Toyota and into third place in the global sales rankings, behind General Motors and Volkswagen.

 center imageLeft: Priora coupe and hatch. Below: C Concept.

Avtovaz – full name Avtomobilniy Volzhsky Avtomobilny Zavod (Automobile Volga Automobile Plant) – was established in the 1960s with help from Italian car-maker Fiat, which lent its product designs to the Russian upstart.

The Russian company famously built the biggest car factory in the world, with 140km of production lines and a huge in-house parts-making capability in the plant on the banks of the Volga River, in Togliatti.

The company’s Lada cars established a reputation for rugged simplicity but rough edges, and failed to grab more than a toehold in western markets in an export foray during the 1980s and 1990s.

In Australia, racing legend Peter Brock become involved with Lada in the wake of his break up with Holden, using his former HDT Special Vehicles factory in Port Melbourne to prepare cars for the showroom.

However, Lada experienced a litany of build-quality problems and increasingly demanding emissions and safety rules, and the brand was withdrawn from Australia and other western markets from 1996.

Under the new ownership arrangements, Renault-Nissan will pay $US750 million in installments for a 67 per cent share of a joint venture with Russian Technologies, buying out venture capitalist company Troika Dialog.

The joint venture will hold a 74.5 per cent stake in Avtovaz, meaning Renault-Nissan will have controlling interest of a tick over 50 per cent in the car-maker.

Russian prime minister Vladamir Putin – a strong supporter of the company in its darkest hours – recently opened a new plant at Avtovaz’s Togliatti factory, adding capacity for an extra 350,000 cars year, taking the total capacity to almost one million units a year.

Renault already has a low-cost brand, Dacia, in Rumania, while partner Nissan has pledged to bring back Datsun.

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