Russian car market faces 50% drop in demand, CEO warns

The Russian demand for domestically-made cars has dropped by about half, AvtoVaz CEO Maxim Sokolov told journalists on April 21, underscoring the challenges of the Russian automotive industry.

Sokolov, the chief executive of Russia's largest state-owned car manufacturing company, said that AvtoVaz itself is expecting a 33% year-on-year drop in Lada car sales in April.

"Last year in April, car sales were around 45,000 units, and last year in March, somewhere around 42,000," Sokolov said, according to Interfax news agency.

"This year... we will reach 30,000 cars in April." Lada car sales have also gone down by about a third in March 2025 when compared to March 2024.

Sokolov's warnings are even more pessimistic than last year, when he predicted a 21-30% drop in sales in 2025 if high interest rates persist. Russia's central bank raised its key interest rate to 21% in October 2024, its highest level since 2003, aiming to curb inflation caused by massive wartime spending to meet its 2026 target.

Some observers have also connected the drop in demand to psychological factors, a phenomenon that has emerged several times over the past decades in periods of economic uncertainty.

"We see how dynamically demand is falling: for our cars, by about a third, on the market as a whole, by almost 50%, including AvtoVaz," Sokolov noted.

The CEO urged the state to expand its support programs for the automotive industry, specifically by reinstating subsidies for families buying cars on credit.

Russia's full-scale war against Ukraine has created major challenges for its economy, driven by sweeping international sanctions and soaring inflation fueled by record-high defense spending

The recent thaw in relations with the U.S. under President Donald Trump has provided a modest boost to the Russian economy, helping the ruble strengthen and improving investor sentiment.