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STRATEGIC PARTNERSHIP WITH AVTOVAZ

The Renault-Nissan Alliance, AvtoVAZ, Russian Technologies and Troika Dialog have signed a non-binding agreement in May 2012. According to the memorandum, the Renault-Nissan Alliance and Russian Technologies will contribute their respective stakes in AVTOVAZ to a joint venture that will control AVTOVAZ, Russia’s largest car company and maker of the iconic Lada brand.

AvtoVAZ, Russia’s market leader  

Renault-Nissan plans to invest about US$750 million, which will give the French-Japanese car group 67.13% of the joint venture in mid 2014. The joint venture will then hold 74.5% of AvtoVAZ. The transaction is expected to be complete by 2014.

 

Renault, which purchased 25% of AvtoVAZ in 2008 and then helped AvtoVAZ pilot an aggressive turnaround, will invest about US$300 million in the joint venture. Nissan, which does not currently own a stake in AvtoVAZ, will invest about US$450 million. Renault and Nissan will make periodic payments through 2014.

 

Russian Technologies has agreed to restructure its outstanding loans with AVTOVAZ with approximately RUB7 billion (US$238 million) proceeds from the anticipated sale of AVTOVAZ’s non-core assets being used to repay part of Russian Technologies’ loans. The remainder of circa RUB46 billion (US$1.56 billion) of interest-free debt is being extended well beyond its current maturity date. This gives AVTOVAZ a strong balance sheet with no 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. “Just as Renault and Nissan will continue their technology transfer to AvtoVAZ plants, our AvtoVAZ colleagues will contribute more and more to the Alliance’s multicultural management bench."

Collaboration remains on fast track  

The memorandum comes after the inauguration of a US$525 million assembly complex in AvtoVAZ’s 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 per year.

 

Renault, Nissan and Lada are launching a product offensive 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.

 

"AvtoVAZ welcomes this agreement between our core shareholders. The company believes the Renault-Nissan Alliance and Russian Technologies shared vision for AvtoVAZ is a key enabler of our future success,” said AvtoVAZ CEO Igor Komarov. “Both core shareholders will continue to bring the support the company needs as it undergoes its biggest transformation plan ever. The AvtoVAZ management team and our partners within the Alliance will continue to accelerate our integration and joint projects."

Real potential 

Russia has a fast growing economy and should remain in the forefront for several decades, thanks to the surge in upper- and middle-class consumers. More than 10 million Russian households already earn more than US$50,000 per year.

 

Total industry volume in Russia last year was 2.65 million vehicles, including light commercial vehicles. Volume in 2012 is expected to reach 2.9 million units.

 

The Alliance sold 878,990 cars in Russia in 2011 – including 578,387 Ladas. With a market share of nearly 33%, Russia is the Alliance’s third largest market after China and the United States.