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Russians Put 50 Billion Rubles into Failing Lada

Renault keeps 25% stake. Offers more technology transfers.

by on Nov.30, 2009

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Lada’s Togliatti plant will expand by about 200,000 vehicles to 900,000 annually.

Renault, government-owned Russian Technologies and Troika Dialog, an investment bank, have signed a memorandum of understanding to reorganize heavily indebted AvtoVAZ, a maker of more than a dozen models, and best known in the west for its Lada brand.

The pending deal, due to close by March 1, will expand Lada’s Togliatti plant by about 200,000 vehicles to 900,000 annually by 2015. It allows AvtoVAZ, in theory, to sustain its Russia auto market share at about 25%, while developing what are thought to be ambitious export operations.

It was only a short while ago that the Russian car market experienced rapid growth to 2.7 million vehicles in 2007. That was when Renault invested $1 billion TK € for its 25% stake in AvtoVAZ.

However, this was pre-financial crash and the ongoing global Great Recession caused by it, which is in the process of drastically altering the auto business, among other industries. In Russia, sales plunged in 2008 to 1.45 million units. Sales are running at about 1.6 million units annually this year — making Renault’s previous planning assumptions of 3.2 million units in 2008, and 4 million vehicles annually by 2014 seem, well, absurd. If it ever happens that would make Russia the largest car market in Europe.

It was the Russian government’s desire to make its auto industry a global player that caused the Opel sale to collapse.

Пожалуйста!

Пожалуйста!

Ultimately, the GM Board of Directors rejected the planned sale of Opel to Magna and Russian Sberbank in early November because it bolstered Russian vehicle sales by using its technology while restricting access of GM’s Chevrolet brand in the huge market and with, apparently, shaky or disingenuous safeguards on intellectual property rights.

AvtovVaz – City of Togliatti, Russia

Soon to be an automotive export hub?

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