The Renault SA (Paris: RNO) and Nissan Motor Co. (Tokyo: 7201) alliance will increase its combined minority stake in Russian car company OAO Avtovaz, maker of Lada brand cars, to a majority stake for $750 million via a new joint venture with the state-owned Russian Technologies, the automakers' alliance announced Thursday.

The Russian auto company has been working with Renault-Nissan for some time as it seeks to bolster its Russian market share. Currently, Renault owns about 25 percent of Avtovaz, and Nissan has no position in the company.

Avtovaz recently completed an approximately €400 million ($525 million) upgrade of the company's factory in Togliatti in southern Russia. That upgrade increased Avtovaz capacity by as many as 350,000 cars per year, for a total annual capacity of almost 1 million cars.

The Russian economy is the fastest-growing national economy in Europe as its upper and middle classes rapidly expand. Total automotive industry volume in Russia was 2.65 million units last year, and it is expected to reach 2.9 million this year. In 2011, Avtovaz and Nissan-Renault sold 878,990 cars in Russia, almost three-quarters of them Ladas. Russia is the third-largest market for Avtovaz/Renault-Nissan after China and the U.S.

The Russian auto market is expected to surpass Germany as the largest in Europe as soon as 2014, according to the Wall Street Journal.

The Avtovaz/Renault-Nissan combo's goal is to increase its market share to about 40 percent in 2016 from about 33 percent last year, Raluca Barb, a Renault-Nissan representative, said in April. Avtovaz is required to maintain a market share of 25 percent under a 2009 agreement with the Russian government, which is the principal owner of the company through state-owned Russian Technologies.

Under the recently announced agreement, the joint venture will hold a 74.5 percent stake in Avtovaz.

Renault made an initial 25 percent investment in Avtovaz in 2008. In the new joint venture, Renault will invest about $300 million, while Nissan will invest about $450. Both companies will make periodic payments through 2014.

Russian Technologies agreed to restructure Avtovaz debt as part of the agreement with Renault-Nissan. Roughly 7 billion rubles ($238 million) of proceeds from the sale of Avtovaz's noncore assets will be used to repay some of the company's debt, currently 46 billion rubles ($1.56 billion). The remainder of the interest-free debt will be extended beyond its current maturity date: This gives Avtovaz a strong balance sheet with no liquidity constraints, according to Renault-Nissan.

The deal between Renault-Nissan and Avtovaz has not yet been completed. It is expected to be finalized by the end of this year, with the joint venture acquiring Russian investment company Troika Dialog's entire stake in Avtovaz by 2014. This stake is estimated to be between 20 percent and 25 percent, according to multiple media reports.

At the New York International Auto Show last month, Renault-Nissan Alliance chairman and CEO Carlos Ghosn touted the multinational management approach of Renault-Nissan as being a major positive factor in the companies' continued expansion and market strength.

Renault SA shares fell 4.76 percent, or €1.63 ($2.13), to €32.50 ($42.52) on Friday.