Russia’s largest car manufacturer could be forced into drastically cutting its production as sales of its leading brand crash amid fears over high borrowing costs.
Avtovaz is the leader of the Russian automotive industry, and is famous for manufacturing Lada cars.
Its flagship Granta model has enjoyed spectacular success since its launch twelve years ago in December 2011.
By November last year, total sales had surpassed 1.5 million, becoming one of the most popular Lada models.
However, brand sales crashed last month as high interest rates began to bite and affect consumer confidence.
Purchases of Lada Granta cars fell by a staggering 25.9% in November compared to the previous month.
In total, Avotvaz car sales across the board were down by almost eight per cent for the month.
These included a downturn in sales for its Vesta model (-10.4%), Niva Legend (-17.8%) and Niva travel (-20.7%).
The car company’s president, Maksim Sokolov, said Avtovaz was facing a “perfect storm”.
He said his company was being hit by the devaluation of the rouble, which occurred late last month, and high interest rates were impacting consumers’ ability to access car loans.
Russia’s central bank has raised interest rates to 21%, which represents a record high.
Bank officials have not ruled out further hikes shortly as they seek to bring down inflation to almost 9%.
Sokolov notes that the rouble’s devaluation means that imports of car components from abroad were becoming much more expensive, substantially reducing production costs.
The company had planned to manufacture 500,000 cars in 2025, but that figure could now be substantially revised downwards due to the worsening economic situation.
Experts are predicting a rough year ahead for all car manufacturers in Russia, and estimate sales could fall by between 30% and 35%.
This would reverse a trend in recent years, which has seen the car market enjoy a relative boom.
