Failure of defense: the Kremlin’s attempt to save AvtoVAZ only accelerated the market takeover by foreign cars
21 November 17:07
The Russian auto giant AvtoVAZ, the main manufacturer of Lada cars, is experiencing a deep sales crisis in 2025. This was reported by Novaya Gazeta, "Komersant Ukrainian" reports.
According to the head of the company, Maxim Sokolov, sales fell by a quarter compared to 2024, amounting to only about 370 thousand units (including exports).
The crisis occurred even as the Kremlin attempted to impose protective tariffs, which only accelerated the replacement of Russian cars with Chinese ones.
Most notably, the decline in Lada sales occurred despite direct government efforts to support the domestic manufacturer:
- Deferred aid: In October, the government planned to introduce new, sharply increased utilization fee (utilization tax) tariffs for imported cars. This was supposed to make foreign cars much more expensive and stimulate demand for Lada.
- The boomerang effect: Due to public protests, the tariffs were postponed twice. This period of uncertainty, on the contrary, provoked a surge in imports, as Russians sought to buy foreign cars at the old prices. Thus, the government’s attempt to protect AvtoVAZ created ideal conditions for competitors.
As a result, the share of Lada cars in the domestic market fell from 25% to 20% in the first 10 months of 2025.
Strategic substitution by China
The drop in AvtoVAZ’s sales is a direct result of the withdrawal of Western companies (such as Renault, which previously controlled the plant) and sanctions that have restricted access to key technologies.
The Chinese auto industry immediately took advantage of the situation. Chinese brands, which have no moral or political constraints on operating in Russia, aggressively seized the vacant niches.
- “Screwdriver production”: Chinese companies are actively opening so-called “screwdriver production” in Russia, assembling cars from off-the-shelf kits.
- Kremlin support: This trend is supported by the Russian authorities, as it provides new jobs for the regions and gives Russian specialists access to new (Chinese) technologies. In effect, Moscow is trading sovereignty in a key industry for the illusion of employment.
Social and economic consequences
The sales crisis has already had direct consequences for tens of thousands of employees of AvtoVAZ and related companies:
In September, AvtoVAZ switched production to a shortened four-day workweek, which could last up to six months.
Amidst the decline in salaries, workers at the plant, which employs about 40,000 people, are leaving en masse.
