AvtoVAZ Struggling to Put Brakes on Sales Slump

MOSCOW - Russia's flagship auto maker AvtoVAZ is on the verge of a crisis due to an ongoing uncontrollable sales decline that has surprised even company management.

Deliveries in April totaled 51,700 units including exports, down 12% from year-ago. The Priora model showed the sharpest decline, tumbling 56% to 4,900 cars, while the Kalina flagship brand skidded 36% to 8,800. Sales of Lada 4x4 vehicles fell 21%, to 3,800.

Year-on-year growth was recorded only by the restyled Lada Granta, the best-selling car in Russia since last September. April sales jumped 59% to 15,600 units.

Responding to the predicament, AvtoVAZ President Igor Komarov says the auto maker will adjust its production and sales plans for 2013 amid falling demand for low-priced cars and the overall market slowdown.

AvtoVAZ believes one reason for the current crisis is the declining popularity of the Samara and Priora. The auto maker believes that situation will improve when production of the updated Priora begins later this month, followed by a June sales launch.

Major AvtoVAZ dealers say most of the auto maker’s current models are unable to compete in terms of either quality or price with low-priced foreign cars.

To stabilize the market and create conditions for a sales recovery, AvtoVAZ is considering strengthening cooperation with its partners Renault and Nissan. This is expected to take place by accelerating the launch of new Lada models on the B0 platform that underpins the Dacia Logan.

The vehicles’ names are not disclosed, but according to local analysts there will be Lada BM-Hatch, Lada B-Cross and Lada Вmodels.

At the same time, the foreign auto makers are in no rush to grow their partnership with AvtoVAZ, developing their own projects in Russia instead.

Renault, for example, is planning to invest up to RR21 billion ($700 million) in new-model launches and the expansion of its Russian production over the next seven years.

Renault Russia spokeswoman Oksana Nazarova says the investment is earmarked for “its own projects and, in particular, for the production of cars under the Renault brand” and is separate from the auto maker’s ties to AvtoVAZ.

Nissan’s plans for independent Russian expansion include investing more than €167 million ($215 million) by 2014 to double capacity of its St. Petersburg plant to 100,000 cars per year. The factory will build some of Russia’s most popular Nissan products, including the Teana, X-Trail and Murano, as well as new-generation Pathfinder and Qashqai models.

The Japanese auto maker also has plans to establish a new stamping plant and a new facility for the production of plastic parts.

AvtoVAZ estimates production of 800,000 cars and knocked-down car kits this year, up 11% from 2012. The domestic sales target of 550,000 cars is 2% more than last year.