Economy, Auto

Renault Firm About AvtoVAZ Takeover

Renault Firm About AvtoVAZ TakeoverRenault Firm About AvtoVAZ Takeover

Renault is sticking to its goal of adding Russian affiliate AvtoVAZ to its books next year, despite an extended plunge in the country's car market.

Renault and Japanese partner Nissan Motor Co. gained control of AvtoVAZ, the owner of Lada brand and Russia's largest automaker, in 2014, Bloomberg writes.

"We've talked about 2016" for consolidating AvtoVAZ, Renault's Chief Financial Officer Dominique Thormann, said in an interview at the auto show in Frankfurt. "It hasn't changed."

The company is a key element in a strategy for gaining at least 40% of Russia's car market in 2016, a challenging goal as Renault sees the market contracting by 35% this year.

Carlos Ghosn, who is CEO of both Renault and Nissan, said in February that the French carmaker should bring AvtoVAZ into its books by 2016 after intending to do it this year.

Combined sales in Russia by the Renault-Nissan alliance and AvtoVAZ fell 27% in the first eight months to just under 348,500 vehicles in a market that plummeted by 34% to 1.05 million deliveries, according to the Moscow-based Association of European Businesses. The Russian company's sales amounted to 181,800 vehicles in the period. The three carmakers together have a market share of 33%.

"AvtoVAZ will only be consolidated if they are sustainably profitable and generate cash," said Arndt Ellinghorst, a London-based analyst with Evercore ISI. "They have no timeline."

Renault has a worldwide target of generating €50 billion ($57 billion) in revenue and a 5% operating margin by the end of 2016. In 2014, sales amounted to €41.1 billion, with operating profit at 3.9% of revenue.

"AvtoVAZ, which needs to be consolidated because it is more than 50% controlled by its partners, will be brought into Renault's accounts once it has met international financial reporting standards," said Helene Mazier, a spokeswoman at the French manufacturer.

Europe is the only region where Renault deliveries are growing. Demand in Brazil and Russia, which are respectively its second- and third-biggest national markets, has been sliding, with no sign of improvement so far. Colin Lawther, who runs production for Nissan in Europe, said at the Frankfurt show that a rebound in Russia is unlikely before the end of 2016. Volkswagen Group said earlier this month that it does not foresee a recovery in the country next year.