Russia’s AvtoVAZ to cut Lada production

Russia's AvtoVAZ to cut Lada production

Russia’s AvtoVAZ said today it plans to cut production of its Lada cars in the next three months by 25,000 because of rapidly declining demand for new vehicles in the country.

The company, controlled by the Renault-Nissan alliance, said it produced 47,100 Ladas as well as 12,100 Renault and Nissan vehicles last month.

“Because of the decrease in sales of all cars in the Russian market, and in order to better manage inventory levels, AvtoVAZ made a decision to reduce production of Lada cars in September, October and November for a total amount of 25,000,” the company said in a statement.

Sales of the country’s best-selling brand fell 16 percent to 220,822 vehicles during the first seven months of the year, according to data from the Moscow-based Association of European Businesses (AEB).

AvtoVAZ said its workers would continue to receive their full salaries in the next three months.

General Motors also said last week it would reduce production at its plant near St. Petersburg and was reviewing its expansion plans in the country.

Car sales have faltered in Russia this year as economic growth has slowed, causing people to put off large purchases. Consumer sentiment has come under further pressure because of Western sanctions over the crisis in Ukraine.

The downturn in Russia’s car market gathered pace in July, with overall sales sliding 23 percent year-on-year after a 17 percent decline in June, according to AEB data. Lada sales tumbled 25 percent to 28,014 in July, AEB figures show.

In 2013, AvtoVAZ produced 438,400 Ladas and 20,800 Renault and Nissan cars, while in the first seven months of 2014 production stood at 213,700 and 51,800 respectively, according to ASM-Holding.