AvtoVAZ is looking to car loan programs in an effort to boost its sales amid growing inventory, according to business daily Kommersant.
The company is developing two car loan programs in order to boost its sales, the company’s President Boris Alyoshin said, Tass reported.
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One of the programs will be financed with AvtoVAZ’s owns funds, the other will be financed by banks, Alyoshin said. He did not provide details about the programs, promising to disclose them in March.
Russia’s two largest banks, government-controlled Sberbank and VTB Bank, are expected to become partners of AvtoVAZ in the loan programs.
AvtoVAZ is facing lower sales, with 110,000 cars, or two month’s worth of its output, remaining unsold at warehouses, Kommersant reported.
Alyoshin attributed the growing stocks of unsold cars to AvtoVAZ’s decision to keep production despite lower sales, as accumulation of finished cars was a better option financially than accumulation of funds amid rapid devaluation of the Russian ruble.
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By GlobalDataAvtoVAZ domestic car sales decreased 60% on last year to 29,100 units in January, the company has said in a statement.
The carmaker attributed the decrease mainly to exchange rate instability, a drop in car loans, and less consumer spending amid the global financial crisis.
AvtoVAZ didn’t export cars in the period.
However, the scale of the decline in January will throw doubt on the company’s own forecast that it will sell around 600,000 cars in Russia this year – just 6% below last year’s total.
The plan looks optimistic given that analysts are saying that the market could fall 25-50% this year.
Russia’s car market has gone into sharp reverse due to the financial crisis and a lack of credit availability for car loans.
