Renault has signed an agreement to buy 25% of AvtoVAZ, Russia's largest carmaker, for over $US1bn.

Renault and Russian state company Russian Technologies will hold 25% each in AvtoVAZ in the long term, the parties said in a joint statement.

The third shareholder, brokerage Troika Dialog, will hold a secondary share placement of AvtoVAZ in autumn 2008 to make the firm's stock more liquid.

"These agreements, which ensure the implementation of the strategic partnership announced on 8 December, 2007 would allow AvtoVAZ and Renault to accelerate the development of AvtoVAZ, renew and expand its vehicle range, grow the Lada brand while respecting its identity, in order to maintain its leadership and share technological expertise and know-how," the statement said.

It added that AvtoVAZ and Renault would share know-how and technology particularly in relation to manufacturing and marketing and with the aim of improving the attractiveness, competitiveness and overall quality of AvtoVAZ products.

AvtoVAZ would benefit from Renault's contributions in relation to platforms and powertrains in order to rapidly renew and enhance the entire Lada product line. The first Lada vehicle to come from this partnership should be in production at the end of 2009.

Sales volumes of Lada vehicles would be consolidated by Renault. Consequently, Russia will become the Renault Group's main market, the statement said.

Five new executives will join the executive committee of AvtoVAZ, four from Renault and one from AvtoVAZ.

AvtoVAZ is the leading automaker in Russia, controlling around 70% of domestic car production and with capacity for about 750,000 cars a year. It builds 14 models in six segments including the Lada Kalina, Priora and 4x4.

The company has a $US330m joint venture with General Motors - GM-AvtoVAZ - to manufacture the Chevy-Niva SUV and Chevy Viva cars. AvtoVAZ and GM each hold a 41.5% share in the venture, while the European Bank for Reconstruction and Development owns the remaining 17%.

Renault was originally established in Russia in 1905, created the Avtoframos company in 1998 in partnership with the City of Moscow, began production in its Moscow plant in 2005, and announced in 2007 that the plant's capacity would be doubled. Alliance partner Nissan's new assembly plant in Saint Petersburg is under construction.

"This partnership with AvtoVAZ should open new development opportunities for Renault and for the Alliance on the Russian market, as well as component sharing activities," the statement added.

See also: HOT TOPIC: Renault-Nissan Alliance adds AvtoVAZ