Prime Minister Vladimir Putin warned on Tuesday that the popular cash-for-clunkers program could be more of a burden than a boon if it causes AvtoVAZ to put off much-needed reforms.
The program, under which drivers can get a 50,000 ruble ($1,600) voucher toward the purchase of an approved Russian-made car in exchange for trading in their old vehicle, has buoyed the fortunes of the flagging automaker, accounting for most of the 23 percent rise in sales over the first half of the year. So far, a total of 213,000 vouchers have been distributed under the program.
The carmaker's bottom line has benefited as well. AvtoVAZ chief executive Igor Komarov told Putin that, thanks to the program, the carmaker had become profitable over the second quarter, earning 1 billion rubles ($32 million) over the period, compared with a 49.2 billion ruble ($1.6 billion) loss in 2009.
But Putin said AvtoVAZ shouldn't let the boost in sales delay what the program set out to do: namely, to aid in the modernization of the country's automotive sector.
"There is a danger that this success, brought about by state support through the cash-for-clunkers program, will put the company's modernization, for which this is all being done, on the back burner," Putin told Komarov.
In addition, he said, AvtoVAZ is undergoing a program of upgrading its technology and investing in its employees, including sending 500 workers for training in the factories of Renault, which owns a 25 percent stake in the Russian carmaker.