Avtovaz expecting market share to drop to 25% after Sept surge in foreign car sales

MOSCOW. Sept 19 (Interfax) - Avtovaz is expecting its share in the Russian auto market to drop to 25% after the surge in sales of Chinese foreign cars in September, Avtovaz president and CEO Maxim Sokolov said.

"We are currently selling an average of plus or minus 40,000 cars per month, and these are records for Lada sales over the past ten years in absolute figures. Nevertheless, the share is still declining, and it is now below 30%. I am certain that it will probably even approach 25% after the surge in September. It should approach the range in which the Lada brand had existed in the previous 15 years," Sokolov said in an interview with RBC.

Autostat analytical agency data indicate that sales of new passenger cars in Russia jumped 6.2% week-on-week to 38,110 vehicles in the first week of September, which was a record for the past five months. The analysts said that the anticipated increase in the recycling fee beginning on October 1 has been driving demand, with dealers and consumers rushing to buy cars at the current prices.

Sokolov said that if the market as a whole shows records, then sales of the Lada brand demonstrate "cautious, slight growth, turning into stagnation, and perhaps even into a decline."

"The main reason for this is the ongoing aggressive expansion of the Chinese auto industry and the expectations of an increase in the recycling fee, which are causing feverish demand for Chinese cars. Even the experts admit that a fairly massive stock of Chinese cars has been created in Russia, and the accumulated stock will likely last at least until the end of the year and perhaps until the end of the first quarter of 2025. Accordingly, this demand is eating away at Lada's share," he said.

The period when Russian automakers feel the effect of the gradual increase in the recycling fee "will be delayed," Sokolov explained, thanking the government and the Industry and Trade Ministry for reaching this decision.

Sokolov also said that Rostec state corporation had returned as a shareholder in Avtovaz.

"When Rostec left as a shareholder in Avtovaz, the deal envisaged an option for the right of repurchase. The corporation invoked this right two years later and returned 32.3% of the shares. Why? The situation was different two years ago than it is today. Everything is changing rapidly," he said. A Rostec representative confirmed to Interfax that the option for the right to repurchase the package "has indeed been implemented."

The Netherlands' Alliance Rostec Auto B.V. joint venture, which Rostec (32.3%) and France's Renault (67.7%) co-owned, controlled Avtovaz until the end of 2021. The JV then transferred to Russian jurisdiction, with Lada Auto Holding LLC becoming the owner of Avtovaz, and the distribution of the stakes in the JV between Rostec and Renault remained the same.

Renault decided to exit the Russian market following the start of the situation in Ukraine and the introduction of sanctions against Russia, transferring its assets to state ownership. Specifically, the stake in Avtovaz was transferred to the Central Research Automobile and Automotive Institute (NAMI) federal state unitary enterprise under the Industry and Trade Ministry, with a buyback option within six years. Rostec continued to control the remaining 32.3% in the automaker, but the corporation withdrew from the capital in May 2023, transferring the stake to NAMI.