Deputy Prime Minister Alexander Zhukov called for new support measures at AvtoVAZ’s mammoth car factory on the Volga to avoid social unrest, as data on Monday showed that car sales in the country plummeted again in July.
Data from the Association of European Businesses showed that car sales fell 58 percent last month compared with the same period a year ago, a slightly worse showing than the 56 percent slump seen in June.
Analysts and government officials have warned that social unrest could radiate from the automotive sector, where companies have been forced to lay off workers, cut wages and shorten work weeks since last fall.
In a rare acknowledgement of the gravity of the problem, Zhukov called for special measures to save jobs in Tolyatti, where AvtoVAZ is located, but said further production halts could be necessary.
“I think the situation in Tolyatti needs a special program for stabilizing the labor market considering a possibly temporary halt to the factory,” he said, Interfax reported.
Last week, about 2,000 autoworkers and their supporters protested in Tolyatti after AvtoVAZ shut down its flagship production facility for the month of August, despite receiving more than $1 billion in government help.
That protest echoed this winter’s unrest in Vladivostok, where demonstrators clashed with police over higher import tariffs imposed to protect domestic makers like AvtoVAZ, which is partly owned by France’s Renault.
The AEB data showed that Russian car sales were down 50 percent in the first seven months of this year, meaning that 881,754 fewer cars have been sold in the period than a year ago.
Among the biggest losers were some of the world’s leading carmakers, including Toyota, Ford and Hyundai, all of whose sales fell by more than 70 percent year on year in July.
Global auto majors had expanded aggressively into Russia over the past years, expecting it to become Europe’s largest market in 2009, as it had long been among the fastest growing.
But instead an unprecedented decline has set in, contrasting sharply with other large emerging markets.
The backbone of Russia’s rescue package for the auto industry has been a subsidy offered to banks for lowering the price of car loans.
But officials and car dealers have said it is failing to attract buyers in significant numbers, even though the state extended the subsidies to a broader range of cars in early July.
“We hope the actions taken by the government will start to reverse this trend during the summer but urge close monitoring of the situation to ensure the actions are taking effect,” said David Thomas, chairman of AEB’s automobile manufacturers committee.
Sales of AvtoVAZ’s Lada brand fell 42 percent year on year in July, slightly better than its average decline of 44 percent for the first seven months of 2009.
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