French carmaker Renault on Friday signed a billion-dollar deal to buy a blocking stake in Russia's biggest auto producer, Lada-maker Avtovaz, in a push into the country's booming car market.
  
Renault chief executive Carlos Ghosn signed off on the purchase at a ceremony in Moscow that ends a years-long race by foreign investors to take a stake in what was the pride of the Soviet car industry.
  
Renault will receive a 25 percent plus-one-share blocking stake in the  carmaker for an initial payment of one billion dollars (657 million euros), Ghosn told reporters at the ceremony.
  
An additional payment of 166 million dollars (109 million euros) will be paid by 2010, depending on the success of the venture, said Sergei Chemezov, the head of Russia's state-owned Rostekhnologi corporation, which owns a major stake in Avtovaz.
  
In buying Avtovaz, Renault is taking a major step into a booming Russian car market that it estimates will reach 2.5 million units in 2007, then grow to 3.5 to 4.0 million units a year by 2015.
  
Avtovaz and Renault "have finally consolidated a qualitatively new level of cooperation between Russia and Europe in the automotive industry," Rostekhnologi said in a statement.
  
Under the deal Renault will help expand annual output at Avtovaz's southern Russia plant to 1.5 million vehicles by 2014, the statement said. The plant currently produces around 700,000 vehicles each year.
  
The two companies will "preserve and further improve the Lada brand" with the aim of producing the first joint Lada car by the end of 2009, Rostekhnologi said.
  
Once this new Lada model is consolidated into Renault's accounts, Russia will become Renault's biggest market in terms of sales, the statement said.
  
"Lada is a Russian brand, part of Russia's culture and will remain so," Ghosn said, addressing Russian fears that the deal might mark the beginning of the end of the Lada brand, much maligned for continuing to use decades-old designs.
  
While Avtovaz remains the single largest carmaker in Russia, it is rapidly losing market share to foreign producers. In 2006, Avtovaz accounted for 32 percent of the car market in Russia.
  
As well as Renault, Russian media reported that US group General Motors, Italy's Fiat and Canadian manufacturer Magna were also interested in taking a share in Avtovaz.
  
In justifying Avtovaz's choice, Chemezov said the French group "had not swallowed" Japanese carmaker Nissan after a recent tie-up.
  
The rising revenues of many Russians as well as the appearance of car purchase loans have encouraged a spending spree on foreign branded cars as Russians leave behind their Soviet-era models.
  
Renault has been producing its Logan model at a factory in Moscow since April 2005 and fellow French car producer Peugeot Citroen in January signed a deal with Russian authorities to build a 300-million euro car plant southwest of Moscow.
  
Other foreign carmakers with Russian production facilities include Ford, Volkswagen and General Motors, whose own joint venture with Avtovaz has disappointed many analysts.