Renault Nissan partners with AVTOVAZ, Russia’s largest carmaker

Renault Nissan and Russian Technologies have announced a new JV with AVTOVAZ, which will ensure that new products are launched and technologies are transferred to…

Renault Nissan and Russian Technologies have announced a new JV with AVTOVAZ, which will ensure that new products are launched and technologies are transferred to AVTOVAZ. AVTOVAZ is Russia’s largest auto manufacturer, and the new alliance which is called Alliance Rostec Auto BV will ensure that Renault Nissan retains a majority stake giving them control over AVTOVAZ besides controlling share of the LADA brand.

This new partnership agreement was announced by Carlos Ghosn, CEO and Chairman of Renault Nissan at a ceremony held in Moscow along with Sergey Chemezov, General Director of Russian Technologies and Chairman of the Board of AVTOVAZ along with Igor Komarov, President of AVTOVAZ.

Joint venture will benefit all 3 parties concerned – Renault, Nissan and AVTOVAZ, accelerating their growth in the Russian markets. Renault Nissan will be investing US$ 742 million which will give them 67.13% of the joint venture by 2014. Individually, Renault will invest US$366 million with a 50.1% stake by June 2012 while Nissan will invest US$376 million and will own 17.03% stake in the joint venture. Russian Technologies will hold 32.87% of the joint venture. For more information, scroll down.

Auto News Release

Renault-Nissan and Russian Technologies create joint venture to finalize strategic partnership with AVTOVAZ
December 12, 2012

Renault-Nissan and Russian Technologies create joint venture to accelerate product launches and technology transfer to AVTOVAZ, Russia’s largest carmaker.

Renault-Nissan will get a majority stake in the joint venture, called Alliance Rostec Auto BV, which will control AVTOVAZ, leader of the Russian auto market .

This deal promotes Renault, Nissan and LADA’s improved synergy and product development in the fast-growing Russian market.

MOSCOW – December 12, 2012 – The Renault-Nissan Alliance and Russian Technologies State Corporation have created a joint venture which will hold their entire equity interests in AVTOVAZ and serve as a stable, long-term controlling shareholder for Russia’s largest car company and the owner of the LADA brand.

Renault-Nissan Chairman and CEO Carlos Ghosn announced the creation of Alliance Rostec Auto BV today at a ceremony in Moscow with Sergey Chemezov, General Director of Russian Technologies and Chairman of the Board of AVTOVAZ, and Igor Komarov, President of AVTOVAZ.

“Today’s historic agreement is a win-win-win for all companies: Renault, Nissan and AVTOVAZ. It is a significant new chapter in an already solid partnership,” Ghosn said. “The joint venture will help accelerate our Russian market offensive. It will support the competitiveness of AVTOVAZ, Russia’s auto industry leader.”

According to the terms of the deal, Renault-Nissan will invest RUB23 billion (US$ 742 million). The investment will give Renault-Nissan 67.13% of the joint venture by mid-2014. The joint venture will then hold 74.5% of AVTOVAZ.

Renault, which purchased 25% of AVTOVAZ in 2008 and then helped AVTOVAZ in its successful turnaround, will invest about RUB11.3 billion (US$366 million) in the joint venture and plans to own 50.1% in the joint venture by June 2014. Nissan which did not previously own a stake in AVTOVAZ, will invest RUB11.7 billion (US$376 million) and plans to own 17.03% in the joint venture by the same period.

Over the same period, Russian Technologies will hold 32.87% of the joint venture.

As part of the deal, Russian Technologies is restructuring its outstanding loans with AVTOVAZ with RUB8 billion (US$258 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$1.48 billion) of interest-free debt is being extended until 2032. This gives AVTOVAZ a strong balance sheet with no liquidity constraints.

By the completion of the deal in 2014, Alliance Rostec Auto BV will have bought out all the shares in AVTOVAZ currently owned by the company Troika Dialog Investment Ltd.

The transaction is subject to applicable conditions precedent, which are expected to be promptly satisfied;

Together in Europe’s economic engine of growth

The Alliance Rostec Auto BV board will be focused on the key shareholder decisions at AVTOVAZ and will be the forum of discussion for the Alliance and Russian Technologies.

As part of the deal, Renault-Nissan Chairman and CEO Carlos Ghosn will become Chairman of the Board of Alliance Rostec Auto BV. The Board of Directors will be composed of:

Three representatives of the Renault-Nissan Alliance: Dominique Thormann, Executive Vice President and Chief Financial Officer, Renault; Joseph Peter, Executive Vice President and Chief Financial Officer, Nissan; and Bruno Ancelin, Senior Vice President and Chairman Eurasia Region, Renault;

Two representatives of Russian Technologies: Sergey Chemezov, General Director; and Igor Zavyalov, Deputy General Director.
The AVTOVAZ board will be increased from 12 to 15 members. Renault-Nissan will have eight board members. The candidates will be approved at the extraordinary AVTOVAZ shareholder meeting on February 12, 2013. Sergey Chemezov will remain Chairman of the Board of AVTOVAZ and will alternate with Carlos Ghosn as Vice Chairman starting in June 2013.

“The Russian automotive market is on the edge of becoming No. 1 in Europe in terms of new vehicle sales, ” said the General Director of Russian Technologies Sergey Chemezov. By 2020, AVTOVAZ, together with its partners, expects to produce, annually, over 1 million cars matching the highest world standards. Thanks to the partnership with the Renault-Nissan Alliance, new modern and highly paid working places will be created for the inhabitants of Togliatti and the region”.

The deal comes eight months after President of the Russian Federation Vladimir Putin inaugurated an assembly complex with manufacturing capacity of 350,000 vehicles per year in Togliatti in Russia’s Samara region. The complex will become home to one of the largest platform-sharing programs in the Renault-Nissan Alliance. It has already started the production of LADA Largus in spring 2012 while the manufacturing of the new Nissan Almera was launched just yesterday with full ramp-up in spring 2013. Production will soon span five models across three brands – LADA, Renault and Nissan. Investments in this project will total about €400 million.

The three partners also build cars at plants in Moscow, St. Petersburg and Izhevsk (700 kms north of Togliatti, acquired by AVTOVAZ in 2012). Each of these plants will continue to benefit from new projects and investments.

With the Togliatti improvements and those planned at other manufacturing complexes, Renault-Nissan and AVTOVAZ will have a Russian capacity of at least 1.7 million cars per year starting in 2016.

“Strengthening of our partnership is a logical next step of our joint operation. Yesterday, AVTOVAZ became home to multiple brands with the production of the first Nissan model in Togliatti. Our rapid integration will improve the efficiency of our common efforts and increase our market share,” said Igor Komarov, President of AVTOVAZ.

Total automotive industry volume in Russia last year was 2.65 million vehicles, including light commercial vehicles. In 2012, the volume is expected to increase to 2.9 million units.

Russia is the third largest market for the Renault-Nissan Alliance.

The Alliance sold 878,990 cars in Russia last year – including 578,387 LADAs, for a market share of nearly 33 percent.