Russia's AvtoVAZ To Suspend Production

Because of the drop in Lada sales.

"AvtoVAZ" announced that in May it will send employees on corporate vacation from May 4 to May 13, follows from the message (taking into account the weekend assembly line will stop on May 2). The company explains it by "another large-scale modernization of production lines and technological equipment" to prepare for the release of a new model - crossover Lada Azimut, scheduled for the third quarter. Work will also be underway on the production line for the Niva SUV, writes The Moscow Times.

The carmaker's dealers are aware of the more than two-week vacation in April and May, but cite another reason: overstocking of warehouses due to low demand. According to Mash, AvtoVAZ assembly lines will actually stand idle from April 27 to May 17 - so the plant wants to avoid switching to a four-day work week. Russia's largest truck manufacturer KAMAZ has already announced the transition to a four-day workweek from June due to falling sales.

Lada has benefited the least from the revival of the automobile market in March, experts of the analytical agency Avtostat noted when discussing the results of the past month. According to the agency's calculations based on registration data, sales of new passenger cars in March rose to 104.3 thousand units, up 31% year-on-year and 30% compared to February. This result accounted for a 7.3% increase in sales over the first quarter (264.9 thousand vehicles were sold). Lada sales during this period fell by 17.4%.

Chairman of the AEB Automobile Manufacturers Committee Alexei Kalitsev urges not to jump to conclusions about the upward reversal of the Russian car market after a successful March. The Higher School of Economics Development Center has no doubt that in the following months demand for new cars will remain below last year's levels.

One of the significant factors of the March "thaw" in the market is emotional, believes the executive director of Avtostat Sergey Udalov. Frosty, snowy winter did not cause the desire to upgrade the car, but the early spring attracted buyers to showrooms. In addition, keeping money on deposit in banks is no longer as profitable as before, and apparently, many people decide to buy a car "at old prices," the expert believes. According to the Central Bank, deposit rates at the end of March returned to the level of November 2023. There are still subsidized loans and special offers on the market, but everyone understands that cars will become more expensive: there are not enough runoffs, and for new deliveries dealers will have to put in the price of the increase in VAT and the utilization fee, explains Udalov.

Most of the leading brands are growing along with the market, but not Lada. According to Avtostat, AvtoVAZ sold 25.2 thousand cars in March - 32% more than in February, but exactly the same amount as a year earlier. At the same time, the second ranked Chinese brand Haval, which produces cars at the plant near Tula, saw a 50% year-on-year increase in sales to 14.8 thousand cars, and even the imported Geely - by 24% year-on-year to 6.3 thousand cars.

Localized Chinese cars such as Haval, Tenet (localized Chery) or Belgee (produced at the Belarusian joint venture Geely) are winning the most in terms of market share, global brands coming to Russia by parallel imports are also noticeably strengthening their positions, while the share of Lada continues to decline, explained deputy head of the analytics department of Avtostat Dmitri Yarygin. For example, Toyota sold 2,800 cars in March - 2.5 times more than a year earlier and almost 43% more than in February. Its Toyota Rav4 model is now in fourth place on the list of the most imported new cars, Yarygin noted.

Buyers are divided into those who want to buy a car of a global brand, as well as pragmatists who are ready to buy a car assembled in Russia, provided it is modern, explained Sergei Tselikov, general director of Avtostat. So far, localized models of Chinese brands seem more advanced to consumers than AvtoVAZ products, and their manufacturers are more active in stimulating sales with subsidized loans and other favorable conditions.

In such a situation, AvtoVAZ's target audience remains primarily those who want a new car for 1-2.5 million rubles, but the problem of the Russian car concern is that its modern models go beyond this price boundary, where they again have to compete with the Chinese, explained Tselikov. That's why an increasing proportion of buyers with small budgets are switching to buying used foreign cars.

In this sense, the Ministry of Industry and Trade is achieving its goal of supporting local production. In March, the share of Russian-made cars amounted to 65% of the total sales against 25% in 2023, but it is not AvtoVAZ that benefits, but its competitors, the expert concluded.

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