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Alliance with AvtoVAZ on Road to 40% Share

Jun 27 – Togliatti, Russia – Renault-Nissan Alliance Chairman Carlos Ghosn spoke with the Global Media Center in Togliatti, Russia, on Wednesday on the expanding contribution of AvtoVAZ, as the partners eye 40% market share in Russia.

Ghosn was visiting the huge central Russian plant as part of Alliance meetings that will bring together executives and shareholders from Nissan, Renault and AvtoVAZ, and where he will be named Chairman of the Board of the Russian automaker’s holding company.

Global Media Center:

Looking at relations between the Alliance and AvtoVAZ, how have ties blossomed in the last five years and what are your expectations for what you’ve called a “win-win” relationship?

CEO Carlos Ghosn:

It’s a win-win because at the end of the day we are already the largest automotive group in Russia with more than 30% market share and our ambition is to become even larger in Russia with the common goal of 40% market share. This 40% market share should be with growth from each one of the brands – Lada from one side, Renault from the other side, and Nissan plus Datsun from the third side.

What have we accomplished so far? I think the first stage has been mainly collaboration AvtoVAZ and Renault, in which Renault has been bringing a lot of technology, platforms, engines, know-how to Lada. Lada has benefited from it, because the cars, which have been the fruit of this collaboration are doing very well on the market, and what we are seeing today is AvtoVAZ struggling in terms of market share, mainly because of the decline of the older cars, while the new cars are doing very well. This is the first phase.

The second phase, with the entry of Nissan into this collaboration, is really a joint effort to boost and support the efforts of AvtoVAZ to transform itself into not only a competitive Russian maker, but also a competitive global maker. Also, to use some of the huge capacity and infrastructure that AvtoVAZ has through the Togliatti plant, or even the Izhevsk plant, and put some of this capacity to serve the needs of Renault and Nissan.

This is a win-win because Renault-Nissan producing at these sites will support AvtoVAZ spreading its fixed cost with a bigger volume, will support the purchasing cost reduction of AvtoVAZ by adding scale to this effort.

At the same time, AvtoVAZ offers production capacity, which is going to be the cheapest capacity that Renault and Nissan can dream of in the Russian market. So, this win-win should continue to the benefit of each one of the brands, allowing us to reach 40% market share with a level of profit for each one of the brands that would have been impossible if each one was going his own way.

Global Media Center:

Renault and Nissan are making cars in Togliatti and Izhevsk, along with Russian industry leader AvtoVAZ. Considering that Datsun is coming on board soon, where do you see this market going?

CEO Carlos Ghosn:

I think the Russian market is going to grow even though in the short term there is a lot of skepticism about the year 2013, some people are predicting the market will shrink by 2%, 3% or 4%, which is possible, because in fact it has been declining for the first months of the year. But I have no doubt that there is a firm intention of the government to re-boost the economy, to put some incentives in order to restart the growth. And fundamentally this is a market where you have less than 300 cars per 1,000 inhabitants, and there is no reason to think that Russia is going to be below the average European country, which is 500 cars per 1,000 inhabitants. So, there is tremendous growth coming. Obviously, it’s not going to be linear and from time to time, we’re going to have stagnation and from time to time we’re going to have small declines, but the overall trend without any doubt is going to be positive.

It is going to become the largest European market. Today it’s the second largest market in Europe after Germany, with less than 3 million cars a year, but in my mind there is much more potential than the German market to grow in the years to come. So, we are here investing and preparing ourselves to be competitive in the largest market in Europe.

Global Media Center:

The Alliance comes here as a partner and a shareholder, and shortly you will take on the title of Chairman of the AvtoVAZ Board holding company. What, if any changes, would you expect for the Russian automaker?

CEO Carlos Ghosn:

AvtoVAZ today has a very clear strategy. It has a product plan – I think the product plan is very good, the technology coming is very good. I think there is a lot of know-how and knowledge coming from Renault and Nissan in terms of manufacturing and the supply chain, in terms of efficiency in general.

What we need is a thorough execution and getting the results from a thorough execution of all these good practices. I’ve been asked by our Russian partner to become Chairman of the Board, in a certain way to symbolize the fact that AvtoVAZ is a partner into this Alliance. I’m willing to do that.

This doesn’t change anything in how we deal with AvtoVAZ. Igor Komarov is CEO of AvtoVAZ, and he is responsible and accountable for all performance of the company and Renault-Nissan are here as partners and shareholders in order to support the effort of AvtoVAZ in a way where we are stronger together.

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