Russia’s automotive industry — once a symbol of the country’s industrial ambitions — has entered another sharp downturn, reversing the fragile recovery seen in 2023 and early 2024.

According to Rosstat, the national statistics agency, car production fell by 20% in the first nine months of this year compared with the same period in 2024, bringing output back to the levels recorded in 2022 — the first year of the full-scale invasion of Ukraine.

The pace of decline has accelerated each quarter: production dropped by 9.2% year-on-year in the first quarter, 23% in the second, and 26.7% in the third, according to Rosstat, cited by The Moscow Times.

Rosstat’s numbers are worse than those of the Association of European Businesses' Automobile Manufacturers Committee, which reported 125,457 new passenger car and light commercial vehicle sales in September, a decrease of 20% compared to September 2024. For the first nine months of 2025, sales were down 23% year-on-year, totalling 922,429 units, according to the AEB. (chart)

As bne IntelliNews reported, the automotive sector came to a screeching halt  in the first year of the war, arguably the worst hit of all Russia’s industrial sectors, as the “just in time” deliveries of car parts from Europe in particular, came to a sudden halt.

Since then almost all the European Original Equipment Manufacturers (OEMs) have pulled out of Russia, with the notable exceptions of China and Iran, who happily stepped into the departing US and European carmakers’ shoes.

However, automotive production almost fully recovered in 2023 and 2024 on the back of a military Keynesianism’s boost to the economy caused by heavy military spending. At the same time, personal incomes grew strongly to record levels, fuelled in part to a chronic labour shortage caused by the war in Ukraine.

That boosted has now exhausted itself as the economy is running at maximum capacity – industrial capacity utilisation is running at around 81%, its practical maximum – and sky high inflation and interest rates are causing Russia economic problems that are getting worse. This year growth is expected to fall to a mere 0.6%, according to the latest International Monetary Fund (IMF) estimates and will be slow next year too as the economy faces a possible recession, according to economists.

The industry, which experienced what analysts called “clinical death” following the withdrawal of Western manufacturers in 2022, had shown signs of revival as Chinese automakers filled the gap, but that momentum has now dissipated weighed down by shrinking domestic demand, persistent supply-chain constraints, dwindling government support and a weakening ruble that has pushed up the cost of imported components.

Production in 2022 fell to 450,000 vehicles — the lowest level since the early 1970s, before the Soviet-era expansion of the Gorky and Tolyatti plants. By mid-2024, output had recovered to around 80% of pre-war levels, but has since dropped back to 50%, according to  Janis Kluge, Senior Associate at the German Institute for International and Security Affairs (SWP), cited by the Moscow Times.

The steepest contraction has been among heavy-vehicle producers. Truck output slumped 30% in the first nine months and 41% in September alone, according to Rosstat. The decline underscores the broader slowdown in construction and logistics — two sectors heavily dependent on truck manufacturing and government procurement.

Sales of new cars have mirrored the production collapse. Between January and September, unit sales fell 22% year-on-year, while overall car sales have dropped to less than half the levels seen in the early 2010s, according to Association of European Business’s Automobile Manufacturers Committee (AEB).

The downturn has already forced industry leader AvtoVAZ, the producer of the iconic Lada brand, to switch to a four-day working week for up to six months. The government has also cut funding for its national EV platform, citing fiscal constraints, while shortages of imported electronics have prevented AvtoVAZ from launching mass production of its new Lada Iskra model.

The Kremlin’s industrial-policy ambitions have further collided with geopolitics. In late September, the Russian government added French automaker Renault SAS to its sanctions list, following media reports that Renault might be supplying drone technology to Ukraine. Renault, which abandoned its majority stake in AvtoVAZ after the invasion, selling it to the government for a reported RUB1, was among the first Western automakers to exit the Russian market.