Renault took a wide lead in the fast-growing market amid plans to enhance its Russian supplier network and produce engines with local partner AvtoVAZ. Rivals Ford and Volkswagen would have a difficult time of following its lead.
The company’s CEO Carlos Ghosn stands to gain more in his three-year pursuit of cooperation with AvtoVAZ after the country this year introduced regulations that penalize vehicle manufacturers that rely on imported components.
Analyst Gaetan Toulemonde at Deutsche Bank commented that the investment seemed risky in 2008 and was an even worse bet in 2009.
The analyst added that it now looks as if Russia could be “Renault’s China.” China’s climb to being the biggest vehicle market in the world has given a boost to Volkswagen AG, which is the country’s leading overseas vehicle manufacturer.
Renault wants to utilize the Soviet-era Lada brand of AvtoVAZ in order to reduce costs by sharing production and suppliers. Renault has previously paid $1 billion for its 25 percent share in Russia's largest vehicle manufacturer.
Renault’s Japanese affiliate, Nissan Motor Co., will launch a Russian- built vehicle based on the no-frills Renault Logan range in 2012. AvtoVAZ may start manufacturing engines and gearboxes for all three brands the following year, the French vehicle manufacturer disclosed last July 19.
Under rules implemented in 2011, carmakers assembling vehicles in Russia should pledge to source gearboxes, engines and 70 percent of components locally in order to avoid tariffs of up to 30 percent on overseas parts shipments. An old decree included no specific requirement for powertrains and lower targets for Russian-made content.