AvtoVAZ is estimating it will take a further two years before Russia makes up the shortfall in the currently decreasing automotive market.

A raft of factors have combined to see the rouble depreciate and interest rates rise, not the least of which is ongoing volatility surrounding the current tense stand-off between Russia, the Ukraine and its Western allies.

The Association of European Businesses (AEB), a Moscow-based association, expects a 4% drop in automotive sales this year, with AvtoVAZ also predicting a tough market environment until 2016.

“What we see on the total market today is roughly a decline of 10%,” AvtoVAZ CEO, Bo Andersson, told just-auto today (22 May) at the St Petersburg International Economic Forum 2014 (SPIEF) event in Russia’s former capital.

“Regarding market outlook I am positive – Russia is a huge country and we will bounce back – it will take two years. At first what you see is economic weakness and [then] you see regular growth. I am not looking to talk of the political situation.”

The AvtoVAZ chief – now five months into his tenure in the top job following his move from GAZ Group – also highlighted the role the Russian government – headed by President Vladimir Putin who will visit SPIEF tomorrow – had played in spurring domestic improvement through the Decree 166 localised content initiative.

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“Being in Russia for more than five years the government has been very responsive – 166 helps all the players a lot,” said Andersson. “We have the advantage we are localised. There will be always benefits of producing in roubles.

“166 is coming to an end in 2020 – I don’t think it will be replaced. You have ten years to become competitive

“I am sure the Russian government will support the car industry as a whole, not just the Russian car industry.”

The start of Andersson’s role at the helm of the Russian giant has also witnessed a major leap in production compared to January this year, to 2,200 vehicles per day exiting the factory, although current market conditions would appear to preclude any significant new hirings.

Indeed, Andersson embarked on a round of headcount rationalistion to stem losses of US$192m last year, following his appointment that saw 2,500 white collar managers leave on top of the 8,000 shop floor staff to go out of a workforce of around 65,000 in the Samara city of Togliatti.

Despite the undoubted short-term issues that are affecting consumer confidence, Andersson remains convinced of AvtoVAZ’s ability to ride out the storm, particularly given new model launches in the pipeline.

“I am a Swede and I say I am the CEO of a Russian company,” said Andersson. “I am optimistic about Russia – today we have some issues but I am sure Russia will come back strongly again.”