Blog: Big is better?
Dave Leggett | 11 December 2007
The tail end of last week saw Renault emerge as victorious in the competition for a stake in Russian behemoth AvtoVAZ.
Renault, GM, Fiat and Magna were all said to be interested in getting closer to AvtoVAZ, seen as offering major scale benefits in one of the fastest growing markets in the world.
And that’s the really interesting thing about AvtoVAZ: its sheer scale. It may be making outdated models, but it still bangs them out in huge quantity at its massive Togliatti plant.
As well as the obvious modernisation challenge, AvtoVAZ can also become a major outlet for Renault engines, gearboxes and other components along the way.
It wasn’t all that long ago that Ghosn’s plan to widen the Renault-Nissan alliance with an American partner ran into the sand. This move gets some momentum back. At a stroke it will make Russia Renault’s main market.
The partnership with AvtoVAZ will certainly open up new opportunities for Renault in Russia and should also bring substantial component sharing gains, if all goes according to plan.
But reinventing AvtoVAZ and integrating its operations into an international corporate alliance will be quite a challenge, even for someone with the undoubted qualities and vision of Carlos Ghosn.
Interesting to reflect on the ongoing debate about corporate scale and format in this industry. The year that saw DaimlerChrysler unravel and Ford put its PAG brands up for sale ends with Renault-Nissan's alliance getting bigger.
Renault has signed an agreement to buy 25% of AvtoVAZ, Russia's largest carmaker, for over $US1bn....
I'm starting to get a small idea of the scale of things here in China, but really, I'm only scratching the surface of this vast country....