2nd UPDATE: Renault, Nissan Don't Rule Out Bigger AvtoVAZ Stake

French car maker Renault SA (RNO.FR) and its Japanese alliance partner Nissan Motor Co. (7201.TO) said Thursday they haven't yet decided whether to increase their stake in Russian automotive group AvtoVAZ (AVAZ.RS), but don't rule out such an investment in the future.

"No decision has been made by either Renault or Nissan concerning the purchase of additional AvtoVAZ shares," the two companies said in an emailed statement. "As part of our long-term strategy, the Alliance will continue to make investments in our business in Russia which could include taking a larger stake in our local partner," the statement said.

Renault acquired a 25% stake in AvtoVAZ in 2008 for $1 billion. Nissan isn't a shareholder of AvtoVAZ, which makes Russia's top-selling Lada brand of cars.

Russia's official government news agency RIA Novosti reported earlier Thursday that Russian Technologies might reduce its 29% stake in AvtoVAZ to 25% by selling a 4% stake after the first part f a new AvtoVAZ share issue is completed. It quoted Russian Technologies head Sergei Chemezov as saying: "We'll probably sell part (of the stake). 4% will make no difference. We'll have 29% after this (share issue) stage, we'll hold on to 25%," Chemezov said.

An AvtoVAZ spokeswoman declined to comment on the possibility of Renault increasing its shareholding, and Russian Technologies spokesman Valeriy Kartavtsev said he couldn't comment on Chemezov's remarks.

Other Russian press reports suggested that Russian Technologies might exchange some of its AvtoVAZ shares for shares in Nissan held by Renault. Renault owns 44% of Nissan, which in turn owns 15% of Renault. The French state also owns 15% of Renault.

Russian TV station Russia Today on Wednesday reported that Carlos Ghosn, chief executive of both Renault and Nissan, had said the alliance plans to increase its stake in AvtoVAZ by acquiring shares from Russian investment company Troika Dialog, which owns 25% of Russia's biggest automotive company.

Speaking in France nearly one year ago, Russian Prime Minister Vladimir Putin said Renault might boost its stake in AvtoVAZ and that in any case the French carmaker had agreed not to see its stake decline. Renault has said that it isn't willing to see its 25% stake in AvtoVAZ diluted, and is pumping EUR240 million into the company through transfers of technology, engineering personnel, purchasing and vehicle assemblies to allow AvtoVAZ to spruce up its product line.

Renault, Nissan and Avtovaz have an industrial alliance under which AvtoVAZ is using the alliance's technical know-how to revamp its ageing Lada product line. Renault and Nissan, meanwhile, are benefiting from industrial capacity at AvtoVAZ's sprawling factory complex at Togliatti to assemble cars there. Renault already manufactures low-budget vehicles for the local market at a plant outside Moscow.

Renault is studying whether it can adapt a vehicle platform being developed by AvtoVAZ for a new ultra low cost vehicle for the Renault and Nissan brands.

-By David Pearson, Dow Jones Newswires; +331 4017 1740, david.pearson@dowjones.com

(Nadia Popova in Moscow contributed to this article)

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