AvtoVAZ has chosen Renault as its strategic partner. Renault was apparently chosen ahead of GM, Fiat and Magna.

Sergey Chemezov, Head of Russian Technologies, Chairman of the Board of AvtoVAZ, Serguei Skvortsov, President of Troika Capital Partners and Carlos Ghosn, President and CEO of Renault signed a Memorandum of Understanding (MOU) in Togliatti, Russia, on Saturday (Dec 8).

The partnership will see the renewal of the product range of AvtoVAZ and the sharing of technologies and know-how between Renault and AvtoVAZ.

Russian Technologies, currently representing the main shareholder of AvtoVAZ, will keep an interest in AvtoVAZ's capital and ensure continuous support from the Russian State.

Russian Technologies and Renault will become equal shareholders of AvtoVAZ once the capital of AvtoVAZ has been restructured in the first half of 2008. Russian Technologies and Renault will control a total of 50% of the shares of the company.

The partnership will also include cooperation in relation to engines and gearboxes with a view to equip both AvtoVAZ and Renault vehicles.

This investment should also significantly contribute to enhancing Renault and the Renault-Nissan Alliance's competitive position in the Russian market.

AvtoVAZ would benefit from Renault's contributions in relation to platforms and powertrains which are expected to help the company to renew faster and enhance the entire Lada product line.

This would also apply to AvtoVAZ' C-segment project.

Sale volumes of Lada vehicles, in agreement with AvtoVAZ and its shareholders, will be consolidated by Renault.

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This comment in from Pal Negyesi:

Mr Ghosn, you'll need to move a mountain.

Hours after I wrote a small commentary on AvtoVAZ for just-auto, it was made public that Renault was chosen as the Russian mammoth's strategic partner.

On one hand Renault is an experienced trouble-shooter.

For years it wrestled with the Moscow municipial government and finally was able to take control of much of the former AZLK plant. The refurbished facility is now home to the Avtoframos factory where Renault produces the Logan for the local market.

And recently it managed to bring the Logan into production in Iran. The car, which is known as Tondar (thunder) in Iran became the focus of a local political debate and production launch was delayed by almost a year, due to frictions between Iran Khodro, SAIPA and Renault.

On the other hand, AvtoVAZ has got its own way. Just two give you two recent examples:
- General Motors signed a joint venture with AvtoVAZ in 2002 and helped to finish development of the second-generation Niva, which was launched as the Chevrolet Niva in 2003 by GM-AvtoVAZ. One of its conditions were that AvtoVAZ would gradually phase out production of the original Lada Niva. AvtoVAZ agreed, then changed its mind and today it actually increases production of the Niva.
- In 2004 AvtoVAZ drew up a three-year road map for investors which featured detailed future product information and volume predictions. Three months after it was made public, the company decided to follow an entirely different path.

There will be a lot of cultural clashes during the next couple of years. However, if Sergei Chemezov, a close ally of Vladimir Putin, who's Board of Directors Chairman at AvtoVAZ will be able to convince his management, that they can learn from a Western carmaker and as a consequence AvtoVAZ will be be a transparent and willing partner of Renault then the Russian auto industry landscape may change significantly by 2015.

AvtoVAZ is a a very well-known brand. If there will be bang-up-to-date technology, enhanced quality coupled with attractive prices then those who are currently investing into a fast-growing market will find a huge and previously unpredicted competitor right in front of them.

Let the good times roll!

Pal Negyesi Editor, ceauto.co.hu

See also: ANALYSIS: AvtoVAZ - how do you transform a giant?