New AvtoVAZ Owners Banking on Russian Market Momentum

PARIS – The recent deal giving Renault a majority interest in AvtoVAZ was in the works before the country’s vehicle market began slowing down.

But Renault and its partners in the joint venture taking over Russia’s largest auto maker believe there’s still enough demand to justify their investment.

“The Russian automotive market is on the edge of becoming No.1 in Europe in terms of new-vehicle sales," says Sergey Chemezov, general director of Russian Technologies.

The state-owned company owns 32.9% of the JV, called Alliance Rostec Auto, that is purchasing 74% of AvtoVAZ. The JV will own the auto maker outright after it purchases the shares now owned by Troika Dialog Investment.

Renault, alliance partner Nissan and Russian Technologies intend to build and sell 1.6 million Ladas, Renaults and Nissans annually in Russia by 2020. Lada is the country’s top-selling brand and accounts for the lion’s share of AvtoVAZ production.

Lada sales increased 7% year-over-year last month, and the brand accounted for 18.8% of Russian light-vehicle volume.

But November’s 240,322 industrywide LV deliveries were just 0.4% above year-ago’s 239,490, marking the first month in two years in which sales failed to substantially outperform the year-ago month, according to statistics released by the Association of European Businesses Automobile Manufacturers Committee.

Russian sales through November were 12% better than the first 11 months of 2011, but the committee says it doesn’t expect a quick return to growth.

President Vladimir Putin warned last month that Russia’s entry into the World Trade Organization would slow down its economy. Much of the country’s wealth comes from its oil and gas, and the European recession is curbing demand.

While growth is seen easing in Russia and other major emerging markets such as China, it is buoyant compared with the 5-year slump in Western Europe sales, or the decade of decline Japan suffered.

Besides Lada, gains were posted in November by Renault, Chevrolet and Volkswagen. Sales fell for Hyundai and Nissan, while Kia, Ford and Toyota were flat, the committee says.

Lada, Renault and Nissan sold a combined 817,390 vehicles in Russia through November, up 2.0% from like-2011, for a market share of 30.5%, WardsAuto data shows. Officials with the newly formed JV say that share could reach 40% by 2017.

_with Peter Homola in Vienna