Car sales in Russia will remain flat this year after halving in 2009, according to the Association of European Businesses (AEB) even though the government's new scrappage incentive is due to kick in during March.

The AEB appears to think the government support measures will fail to offset a lack of cheap car credit. It said it expects some 1.5m cars to be sold in Russia in 2010, almost unchanged from 1.47m last year, and that in turn was down 49% on 2008 when the country was on its way to overtaking Germany as Europe's biggest car market before the rouble devaluation effectively closed access to cheap credit.

Reuters noted that, in contrast, car sales in Germany, Europe's largest car market, rose to 3.8m in 2009 from 3.1m in 2008 thanks to the government scrapping scheme.

This year, new car sales in Germany are expected to drop 25% to between 2.75 and 3m after government subsidies to scrap old vehicles and buy new replacements ended.

The Russian government plans to offer RUR50,000 (USD1,700) vouchers to people to scrap cars that are 10 years old to buy locally made or assembled vehicles. Analysts and the AEB have said, however, that the measures are too small to offset the decline and will be hindered by bureaucracy.

The government has also offered to subsidise interest on car loans but the number of applications was much smaller than expected.

AEB said car sales fell 38% in December year on year - a better showing than the 46% fall in November, partly explained by a purchasing rush before the new year when car dealers offer big discounts.

Nine out of 10 models topping the list of best selling cars in Russia in 2009 were built locally. Renault's Logan was the best selling foreign car in 2009 with 53,869 units and AvtoVAZ's Lada Priora was the top local model at 99,473.

Separate data showed Russian consumer confidence rose to a one year high in the final quarter of 2009, thanks to a nascent economic recovery, but people remained far more pessimistic than before the credit crisis.

Russia's economy returned to growth in the third quarter of 2009 in seasonally adjusted quarter on quarter terms, after weathering its first recession in a decade. But the recovery is expected to be slow, with gross domestic product (GDP) unlikely to return to pre crisis levels before 2012.