AvtoVaz starts making cars with airbags again, but car sales remain depressed

AvtoVaz starts making cars with airbags again, but car sales remain depressed
Russia's automotive sector is struggling to come to terms with the new realities and has slowly started to recover but the lack of imported parts remains a major obstacle / bne IntelliNews
By bne IntelliNews August 24, 2022

Russian carmaker AvtoVaz has resumed production of Lada Granta 2022 line cars with airbags, the company said on August 24.

Sales of new cars has almost collapsed and those of used passenger cars in July decreased by almost 18% y/y as consumers save more and spend less due to the economic uncertainty, according to Avtostat info survey based on vehicle registration data. Russians bought a total of 478,044 used cars in July.

AvtoVaz began to produce its cars without airbags after imports of parts were stopped following the start of the war in Ukraine. As bne IntelliNews reported, car production came to a screeching halt in the first months of the war with total cars assembled falling to a mere 3,000 in June from the typical 100,000 that are produced a month. By July production picked up a little but remains at about 10% of the average as supply problems persist.

“AvtoVaz has resumed production of Lada Granta vehicles equipped with airbags for the driver and front passenger. The price of the basic version of Granta, equipped with a driver's airbag, starts from RUB602,800 ($10,000) under the state program of preferential lending, which is valid only until December 1, 2022 (or RUB753,500 at normal rates),” the statement said.

The Lada Granta and the 2022 Lada Niva Legend models are currently being produced in "simplified" versions and missing many of the standard accessories. However, various security systems are being reintroduced such as the Era-Glonass emergency warning system, which is based on the Russian GPS system. This feature has not been available since last September due not to sanctions, but a shortage of microchips that hit the whole industry.

Earlier, AvtoVaz announced plans to launch the production of cars with anti-lock braking system (ABS) from 2023. According to the head of the company Maxim Sokolov, after that ESP lateral stability system, which stabilises the vehicle when sharp turns and slopes, preventing him from skidding will be reintroduced.

As bne IntelliNews reported, Russia is looking for new partners to supply it with the sophisticated parts it can no longer import from Europe and has turned to the Iranian and Chinese automotive sectors for help.

Used car sales down

The sale of new cars has come to virtual standstill since the war in Ukraine began with sales falling to 27,761 in June down 82% y/y according to the Association of European Business’s Automobile Manufacturers Committee (AEB), before recovering somewhat in July to 34,412 sales, still a 72% fall in sales y/y. over the first six months of this year a total of 370,228 cars have been sold in total, 57.5% less than in the same period a year earlier. (chart)

The sale of second-hand cars has held up much better, falling by only a fifth in July. Between January and July a total of 2.87mn used cars were purchased, 70% of which were foreign cars. But in general Russians are avoiding big ticket purchases while the economic outlook remains uncertain.

Of the 478,044 bought in the first six months of this year, a bit less than a third (29%) were Russian brands, while the remaining 71% were foreign made cars. Russian brands improved their share of second-hand sales by only 1pp, but in July, the sale of foreign cars fell faster than domestic ones: by 18.6% against 15.2%.

A quarter of the second-hand market belongs to AvtoVaz products, but even the sales of Lada are declining. In July, Russians bought 118,865 Lada cars (-14%) and in the first seven months of this year they bought 741,540 (-8%).

Japanese Toyota holds the second place on the market but sales are less than half the sales of AvtoVaz on the second-hand market. Toyota’s sales were 50,548 in July and 302,227 cars in seven months, down about 17% in both cases. The third place is occupied by the Korean Kia, the sales of which turned out to be almost two times less.