The Russian automotive industry, which had shown signs of recovery in recent years following a sharp decline, is now once again heading toward a steep downturn, SİA reports citing The Moscow Times.
Data from Russia's Federal State Statistics Service (Rosstat) reveals a dramatic 20% drop in vehicle production between January and September of this year, returning to levels last seen in 2022. This marks a significant acceleration of the industry’s decline, which has been intensifying each quarter. In the first quarter, production fell by 9.2% year-on-year, in the second quarter it plummeted by 23%, and in the third quarter, the drop reached 26.7%.
In the wake of the conflict in Ukraine, Russia’s automotive sector lost nearly half of its production in the first year of the war. By 2023, total vehicle production had fallen to 450,000, a level not seen since the early 1970s, when the automotive plants in Gorky and Tolyatti had not yet been fully operational.
Yanis Kluge, a researcher at the German Institute for International Security Studies, stated that at mid-2022, vehicle production had reached 80% of pre-sanction levels, but this number has now dropped to just 50%.
Truck manufacturers have been hit hardest, with production declining by 30% during the first nine months of the year, and by a staggering 41% in September alone. Kamaz, the largest truck manufacturer in Russia, reported a 57% drop in truck sales and a net loss of 29.1 billion rubles for the first nine months of the year, a 7.6-fold increase compared to last year’s losses.
AvtoVAZ, Russia’s largest car manufacturer, which produced 500,000 Lada vehicles last year, has had to reduce its production target for this year to 300,000 units. The company has also shifted to a four-day workweek at its Tolyatti plant.
Despite these challenges, around 80% of passenger car sales in Russia are still financed through loans. However, following an interest rate hike by the Central Bank of Russia, the highest in 20 years, access to credit has become difficult for most Russians, further dampening demand for new cars.
According to Avtostat statistics, vehicle sales dropped by 22% between January and September of this year. This has led to the closure of hundreds of car dealerships across the country, with certain cities, such as Rostov-on-Don, St. Petersburg, and Krasnoyarsk, experiencing double-digit declines in car sales.
Yuri Chistov, Director of Market Development at FRESH, a Russian automotive market consultancy, noted that new car sales have fallen by 2 to 2.5 times compared to the first half of the 2010s. He added that there are no clear signs that the purchasing power of the Russian population will improve in the next one to two years: "This year has been, essentially, a perfect storm for the automotive market."
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