Cash-For-Clunkers Gives Lada a Boost

The government’s cash-for-clunkers program has increased demand for AvtoVAZ cars, with more than half of applications going for the cheapest models.

Almost immediately after the start of the cash-for-clunkers program on March 8, there was a shortage of certain Lada models, several dealers told Vedomosti. Two Lada Classic models, Lada 2105 and Lada 2107, had the highest level of demand, said Alexander Chulkov, commercial director of Avtogermes. The Lada 2105 ran out almost immediately. After that people started buying the 2107 — AvtoVAZ’s cheapest car — and thanks to the 50,000 ruble vouchers, the car’s price fell almost by a third, he said. Without the discount, the Lada 2105 starts at 163,576 rubles ($5,560), while the Lada 2107 starts at 176,307 rubles.

The program experienced far fewer sales of other AvtoVAZ models. The worst performer was the Priora, for which there were almost no applications, Chulkov said. The Lada 2105, at a special price of 99,000 rubles, sold out in a few days, and now dealers are trying to drive buyers’ attention to other models that have lower levels of demand, such as the Samara and Kalina, said Vladimir Yarkin, CEO of Avtotrade.

Before the program’s start, the Classic wasn’t very successful: Lots full of unsold cars were filled up mostly by Lada Classics, said Sergei Tselikov, deputy CEO of Avtostat.

Last year, the Priora was the most popular model. AvtoVAZ sold 99,473 Prioras, compared with just 67,216 Classics, according to data from the Association of European Businesses. At the beginning of this year, the Priora retained its top spot. For the January-February period, there were 11,888 of the cars sold, while the Classic lagged behind not only other Lada models, but also the Renault Logan and the Ford Focus. Over the two months only 5,109 Lada 2105 and 2107 models were sold. The delayed demand can be explained by the fact that budget car buyers waited until March to purchase their new cars, when the program kicked in, Tselikov said. What’s more, AvtoVAZ recently decreased its production of the Classic and transferred it from its first assembly line, which was closed for modernization, to the second, where the Samara is assembled.

According to the Industry and Trade Ministry, as of Monday, 28,234 cash-for-clunkers certificates, out of a total of 200,000, had been given out since March 8. AvtoVAZ is the unquestioned leader in the program, with about 70 percent, or 20,000, of the program certificates going toward the purchase of a Lada, a ministry spokesman said.

The number of cars actually sold is significantly lower. At the end of last week about 25,000 Ladas were sold, but of those only 5,000 were sold through the program, said AvtoVAZ spokesman Igor Burenkov.

The Classic is breaking records, with 50 percent to 60 percent of those looking to buy a Lada choosing that model, said Burenkov.

At dealerships, lines are already forming for the Classic, said Chulkov. After filling out all of the necessary documentation, buyers must wait about 10 days to get the cars, he said. Buyers who want to buy the Classic for cash, without the program, are at times refused. AvtoVAZ has promised dealers help with this problem and already has started shipping additional cars, Chulkov said.

AvtoVAZ did not expect that the surge in demand for the Classic would be so strong, Burenkov said. But the company doesn’t plan to change its production plans. In April, the company will build 40,300 Ladas, 5.5 percent more than in March. Burenkov wouldn’t say how many of those would be Classics, but he said the plan for May and the following months would take into account the increased demand. ? 

Factories should think about not only increasing production but about increasing prices for the Classic: This is the normal market reaction to a quick rise in demand, Yarkin said.