AVTOVAZ Call with Financial Analysts Nicolas MAURE / Dr. Stefan MAUERER CEO / CFO 16.01.2017 Disclaimer Information contained within this document may contain forward looking statements. Although the Company considers that such information and statements are based on reasonable assumptions taken on the date of this report, due to their nature, they can be risky and uncertain and can lead to a difference between the exact figures and those given or deduced from said information and statements. PJSC AVTOVAZ does not undertake to provide updates or revisions, should any new statements and information be available, should any new specific events occur or for any other reason. PJSC AVTOVAZ makes no representation, declaration or warranty as regards the accuracy, sufficiency, adequacy, effectiveness and genuineness of any statements and information contained in this report. Further information on PJSC AVTOVAZ can be found on AVTOVAZ’s web sites (www.lada.ru/en and http://info.avtovaz.ru). AVTOVAZ Call with Financial Analysts 16.01.2017 2 AVTOVAZ Overview Moscow International Automobile Salon 2016 AVTOVAZ 50-years History 1966/1970 VAZ 2101 2016 LADA XRAY AVTOVAZ Call with Financial Analysts 16.01.2017 4 AVTOVAZ Group: Key information 408 467 Cars & KDs produced 20.1% MOSCOW AVTOVAZ 331 Representative office sales points 30 IZHEVSK LADA-Izhevsk countries TOGLIATTI plant AVTOVAZ Head-office & 2015: 176.5 B-Rub (2.6 B-Euro) Togliatti plants 2016: estimated T/O > 2015 51 527 p. AVTOVAZ Call with Financial Analysts 16.01.2017 5 LADA product portfolio LADA Granta LADA Kalina LADA Priora LADA Vesta LADA XRAY LADA Largus LADA 4x4 Granta Sedan Kalina Hatchback Priora Sedan Vesta Sedan XRAY Largus 5- or 7-seats 4x4 3-doors Launched Launched Nov, 2015 Feb, 2016 Granta Liftback Kalina Wagon Largus Cross 4x4 Urban 3-doors 5- or 7-seats Granta Pick Up Kalina Cross Largus Fourgon 4x4 5-doors LADA Sport Granta Sport Kalina Sport 4x4 Urban 5-doors Kalina NFR 4x4 Pick Up AVTOVAZ Call with Financial Analysts 16.01.2017 6 Russian PC Market Achievements 2016 – LADA Market Share Top-10 brands, К units / MS % Top-10 models, К units 2016 MS vs. 2015, % LADA 20.1% 266.3 Hyundai SolarisHyundai Solaris 90.4 LADA +2.2% Renault Kia 11.3% 149.6 LADA Granta LADA Granta 87.7 Toyota Skoda Hyundai 10.9% 145.3 Kia Rio Kia Rio 87.7 Ford Lexus Renault 8.8% 116.8 LADA Vesta LADA Vesta 55.2 Kia VW Toyota 7.1% 94.3 VW Polo VW Polo 47.7 Lifan Hyundai BMW VW 5.7% 76.1 Renault DusterRenault Duster 44.0 UAZ Mercedes-Benz Nissan 5.3% 70.5 LADA Largus LADA Largus 36.3 Land Rover Audi Skoda 4.2% 55.4 Toyota RAV 4Toyota RAV 4 30.6 Mazda Mercedes- Datsun Benz 2.8% 36.9 Chevrolet NivaChevrolet Niva 29.8 Nissan Ford Chevrolet 2.8% 36.9 Renault LoganRenault Logan 29.6 Mitsubishi AVTOVAZ Call with Financial Analysts 16.01.2017 7 AVTOVAZ: Togliatti and Izhevsk plants overview Togliatti Izhevsk Capacity* 650 K vehicles per year Capacity* 113 K vehicles per year 3 Vehicle Lines** + 1 Vehicle Line + Powertrain & Components Lines Components Lines 312 K cars*** in 2016 96 K cars*** in 2016 * Harbour standard (3 760 h per annum) ** From 1/2017 *** Including KDs AVTOVAZ Call with Financial Analysts 16.01.2017 8 Mid-Term Plan (approved by BoD on Dec 6th, 2016) Russian Passenger Car Market Outlook Passenger cars per 1 000 people (2015) Age of Russian car fleet (> 40 Mio cars in 2015) 1 000 US (PC+LCV) 800 UK Germany 600 France 5-10 years Poland 28% >10 years US (PC) 400 46% Russia Czech Republic South Korea 200 Turkey Mexico <5 years Ukraine 0 26% India Russian PC Market Outlook and LADA Market Share 3 000 2 760 2 774 0.9 2 626 optimistic scenario 2 497 0.8 2 500 2 358 0.7 2 000 1 789 0.6 1 507 0.5 1 500 1 376 1 327 0.4 29.3% 25.8% 1 000 23.2% 23.3% 0.3 19.5% 20.1% 17.4% 16.4% 17.9% 0.2 500 0.1 640 355 524 581 541 456 387 269 266 >400 >500 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 AVTOVAZ Call with Financial Analysts 16.01.2017 10 AVTOVAZ Mid-Term Plan storyline BACK ON TRACK in two phases 1 2 2016-2019 2020-2026 Rebound through: Profitable growth through: • Robust 20% PC MS in Russia • Complete product/market portfolio regeneration • Strong cost optimization • Full utilization of capacities • Deep supplier localization (3 vehicle lines in Togliatti & • Quality and customer satisfaction 1 in Izhevsk) • Fully integrated Alliance • Export sales ramp-up standards and systems Positive COP from 2018 COP > 5% from 2021 FCF breakeven in 2019 FCF positive from 2020 AVTOVAZ Call with Financial Analysts 16.01.2017 11 Transformation of LADA brand good opinion from customers 66 63 62 61 59 Competitor 1 55 50 50 48 45 44 43 Competitor 2 38 36 36 35 35 Competitor 3 33 33 Competitor 4 30 30 27 28 27 27 Competitor 5 23 17 16 15 12 12 11 5 4 5 3 Competitor 6 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 AVTOVAZ Call with Financial Analysts 16.01.2017 12 LADA vehicles export sales growth projection (incl. SKD & CKD) K-units p.a CIS Other countries 180 150 120 export countries in 2017 90 60 30 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 AVTOVAZ Call with Financial Analysts 16.01.2017 13 LADA Product Plan directions 2 New models 5 New models 5 New models 4 Facelifts 2 Facelifts 5 Facelifts 2017 - 2019 2020 - 2022 2023 - 2026 AVTOVAZ Call with Financial Analysts 16.01.2017 14 AVTOVAZ cost optimization key levers • New working scheme with suppliers Monozukuri • Production optimization (including Components) • Productivity improvement • Creation of Industrial park AVTOVAZ Call with Financial Analysts 16.01.2017 15 2016 – 2019 AVTOVAZ Mid-Term Plan: strong performance boost to secure recovery THROUGH HEADWINDS BACK ON TRACK 2012 - 2015 2016 – 2019 Drop to the level of 2011 > 50% growth from 2016 to 2019 REVENUE impacted by Russian market drop supported by Russian market recovery MARKET SHARE RF Drop down to 16.4% > 20% robust market share EXPORT Fall by 3 times Substantial growth to >50ku (2019) Growth of costs under FX changes, Localization and Monozukuri; COSTS inflation and drop of volumes Manuf. performance at Alliance level SG&A High administrative expenses Optimization of SG&A LADA BRAND OPINION/ 11-17 % of respondents positively Growth in number of respondents assessing the brand; positively assessing the brand; QUALITY Improvement in Quality Quality at global level OPERATING PROFIT Negative Positive from 2018 FREE CASH FLOW Negative Move to breakeven in 2019 AVTOVAZ Call with Financial Analysts 16.01.2017 16 Production volume forecast (cars + KDs), k-units LADA Alliance and partners 3 shifts capacity (4 800 h per annum) 1 000 800 2 shifts capacity (“Harbour” standard, 3 760 h per annum) 600 400 200 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 AVTOVAZ Call with Financial Analysts 16.01.2017 17 AVTOVAZ Mid-Term Plan roadmap Revenue, B-RUB COP before non-recurring items, B-RUB 100 700 80 60 600 40 5% 20 - 500 (20) x2 (40) 400 2023 2014 2015 2016 2017 2018 2019 2026 Free cash-flow, B-RUB 300 +50% 50 40 200 30 20 10 - 100 (10) (20) (30) (40) - (50) 2014 2015 2016 2017 2018 2019 2023 2026 2017 2014 2015 2016 2018 2019 2023 2026 AVTOVAZ Call with Financial Analysts 16.01.2017 18 Conclusions • Full leverage of Russian market recovery with minimum 20% passenger cars market share through: • full renewal of LADA vehicle line-up • transformation of LADA brand image • Export push in CIS and other selected regions of the World • Strong cost optimization through: • deep localization and Monozukuri with suppliers • manufacturing performance at Alliance level • headcount optimization (Industrial Park in Togliatti) • Full utilization of Togliatti and Izhevsk plants’ capacities for LADA, Renault and Nissan/Datsun vehicles • Full integration of Alliance standards and systems • Strong support from Renault Nissan Alliance and Rostec COP positive from 2018 and > 5% from 2021 FCF breakeven in 2019 and positive from 2020 AVTOVAZ Call with Financial Analysts 16.01.2017 19 Q & A .