OREANDA-NEWS. December 01, 2009. During his Paris visit PM Putin announced that Russian passenger car producer AVTOVAZ will get an additional RUB50bn (US1.67bn) subsidy from the state, coupled with about EUR300m in investments from Renault-Nissan. Renault will maintain a 25% stake, which it could increase in the future, reported the press-centre of OTKRITIE Financial Corporation.

View: AVTOVAZ reported a net loss of US 600m in 1H09 and carries US 2bn in debt. Without this decision, the company could go bankrupt on the back of a two-fold decline in its car sales volume in 2009. Now the company possesses the possibility of achieving its main goals:

Maintaining a good relationship with Renault;

Substantially reducing its debt burden;

Obtaining vital investments, technologies and equipment from its French partners.

According to AVTOVAZ, by 2015 the producer intends to increase its output volume to 900,000 units (350,000 in 2009E), 70% of which will be comprised of AVTOVAZ branded models (such as "Lada"), and 30% by Renault-Nissan models.

We consider the news as positive for AVTOVAZ, though we remain concerned about the company's ability to fulfill its mid-term plans and to become an efficient, world-class automotive producer.