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Carlos Ghosn, Renault chief executive, has set his sights on dominating the booming Russian car market after agreeing to buy a quarter of Avtovaz, makers of the Lada, which used to rank as one of the world's worst auto brands.
Mr Ghosn, who is also chief executive of Nissan, said Renault would significantly improve the ailing Lada brand within a market expected to become the largest in Europe by 2015, overtaking Germany with up to 4m vehicles sold annually.
Car sales in Russia are expected to grow by more than one-fifth this year and increase at a similar pace in 2008, he said.
The French group fought off competition from General Motors, Fiat, Volkswagen and Canada's Magna International to acquire its 25 per cent stake in Avtovaz in a deal due to be completed early next year.
It refused to disclose the price it is paying but Thierry Moulonguet, chief financial officer, said it had agreed a "reasonable multiple" over earnings for its holding in a company valued at $5.7bn.
Sergei Chemezov, head of the state-controlled arms manufacturer Russian Technologies, Avtovaz's owner, said it was "fair, close to the market price".
The deal will give Renault and Nissan access to close to 40 per cent of the Russian market that has already attracted GM, Ford, Toyota, VW and other western manufacturers. Russian car sales are expected to reach 2.5m this year.
Avtovaz, which also makes the 4x4 Niva, will sell an estimated 700,000 cars in Russia this year, giving it a 30 per cent market share, well down on the 52 per cent it held at the beginning of the decade as foreign owners increase their presence.
Renault has a new plant in Moscow and its partner Nissan is building a facility in St Petersburg.
Ghosn and Chemezov said the aim was to boost output to 1.5m cars a year, including at Togliatti, the main Avtovaz plant 620 miles from Moscow.
