PARIS (Bloomberg) -- Carlos Ghosn's negotiations to take control of AvtoVAZ may be the Renault-Nissan alliance's final opportunity to grab the leading position in one of the four largest growth markets.
“It's their last-chance saloon for getting into emerging markets in a meaningful fashion,” said Erich Hauser, an analyst with Credit Suisse in London. “If they get Russia right, they'll be starting from a position of strength.”
Ghosn, who heads Renault SA and Nissan Motor Co., needs Russia because mature markets are stagnating and the remaining three biggest emerging markets already have dominant overseas carmakers. Volkswagen AG is the biggest in China, Fiat S.p.A. is largest in Brazil and Suzuki Motor Corp. leads in India.
The CEO estimates Russian auto sales will reach 4 million by 2015 and he aims for 40 percent of those deliveries by taking over AvtoVAZ and expanding production by 700,000 vehicles. Nine-month sales gained 18 percent to 1.32 million, according to data from the country's Association of European Businesses.
Renault-Nissan is in talks with Moscow brokerage Troika Dialog and state-owned Russian Technologies Corp., which each hold 25 percent of AvtoVAZ, to take a controlling stake in Russia's largest carmaker at the urging of Russian Prime Minister Vladimir Putin, Ghosn said last week. Renault-Nissan currently owns 25 percent, valued at 12.4 billion rubles ($410 million) at yesterday's close.
“Renault-Nissan gets political backing, a strong Russian brand and arguably a license to dominate the market,” said Max Warburton, a London-based Sanford C. Bernstein analyst who has an “outperform” recommendation on Renault. “Ghosn's investment looked like Russian roulette in 2009 but could prove pretty lucrative in coming years.”
The Russian auto market, after plunging 50 percent last year, is recovering with the help of government incentives and may overtake Germany to become Europe's biggest by 2015, analysts predict. Renault-Nissan is in pole position to harness that growth in tandem with AvtoVAZ, whose Lada badge adorns one in every four cars sold in Russia today.
France-based Renault's plan to dominate Russian sales after receiving the government's blessing follows a playbook rivals used to gain leading footprints in other emerging markets.
Germany-based VW owes its lead in China to a successful encounter with a visiting Chinese delegation in the 1970s, said Christoph Stuermer, a Frankfurt-based analyst at IHS Automotive. Europe's biggest carmaker now claims more than 11 percent of Chinese vehicle sales, according to IHS data. Suzuki, once invited to rescue Indian carmaker Maruti, now dominates that market with a 36 percent share.
Renault plant investments in Brazil and Argentina have not loosened Fiat's grip on the Latin American market, with a 24 percent market share, compared with less than 5 percent for Renault-Nissan, according to IHS. The alliance is the sixth- biggest carmaker in China and 10th largest in India.
AvtoVAZ leads the Russian market with a 28 percent share, while Renault-Nissan has 9 percent. Ghosn's potential empire would have a commanding 37 percent of sales.