Renault-Nissan to build second engine with AvtoVAZ

Thu Nov 28, 2013 1:51pm EST
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By Laurence Frost and Gilles Guillaume

BOULOGNE-BILLANCOURT, France (Reuters) - Renault-Nissan will build a second engine with Russian partner AvtoVAZ (AVAZ.MM: Quote) and aims to overcome a decline in Lada sales in a market set to overtake Germany within two years, Renault's (RENA.PA: Quote) regional boss said on Thursday.

Production of a long-planned 1.6-litre engine begins this week at the AvtoVAZ plant in Togliatti and will soon expand to a second petrol engine, Bruno Ancelin said in an interview at the French carmaker's headquarters outside Paris.

Renault and Japanese alliance partner Nissan (7201.T: Quote) are increasing local parts sourcing as they prepare to take control of the maker of Lada cars and defend a combined 30 percent market share against an encroaching Hyundai (005380.KS: Quote).

Russian auto sales have fallen 7 percent so far this year as the broader economy falters on declining oil and gas revenues that have helped propel the rouble to a four-year low.

But Renault expects the market to return to growth of about 3.5 percent next year after sliding between 6 and 7 percent to 2.8 million cars in 2013.

"This kind of mini-crisis has happened before without going full-blown," Ancelin said.

Underlying demand remains strong, in a country where more than half the cars on the road are at least 10 years old, and will overtake the German market within two years, he predicted.

Renault owns 43.4 percent of Nissan and paid $1 billion for an initial 25 percent AvtoVAZ stake in 2008. Under a deal struck last year, Renault and its Japanese affiliate are to take joint control of the Russian automaker in 2014.   Continued...

Carlos Ghosn, chairman and CEO of the Renault-Nissan Alliance, gestures as he speaks at a news conference in the southern Indian city of Chennai July 16, 2013. REUTERS/Babu