Sales of new cars in Russia, a year ago the fastest growing market in Europe and threatening to usurp Germany as number one, continue to plummet – falling 58% in July compared to the same month a year ago to 115,483.


Sales are now running 50% down this year compared to 2008, leading to calls from a Russian minister for new support measures at AvtoVAZ‘s car factory on the Volga to avoid social unrest. Workers there have already held protests over job cuts and plans for shorter working hours.


Data from the Association of European Businesses (AEB) showed the fall in car sales in July was slightly worse than the 56% slump seen in June. Analysts and government officials have warned that social unrest could radiate from the automotive sector.


Deputy Prime Minister Alexander Zhukov called for special measures to save jobs at AvtoVAZ based in Togliatti but said further production halts could be necessary.


Last week, about 2,000 workers and their supporters protested in Togliatti after AvtoVAZ shut down its flagship production facility for the month of August despite receiving over $1bn in government aid.
That protest echoed this winter’s unrest in the city of Vladivostok, where demonstrators clashed with police over higher import tariffs imposed to protect domestic makers like AvtoVAZ, which is 25% owned by Renault.


The AEB data shows that 881,754 fewer cars have been sold in the first seven months of this year compared to the same period a year ago. Toyota, Ford, and Hyundai each saw their sales fall by more than 70% year on year in July.


Sales of AvtoVAZ’s Lada brand fell 42% year on year in July, slightly better than its average decline of 44% for the first 7 months of 2009.


The unprecedented decline in new car sales in Russia contrasts sharply with other large emerging markets. India saw demand for cars increase in July for the sixth month in a row, sales in China rose 70.5% from a year earlier, while Brazil’s sales in June were higher than any previous month in history, encouraged by a suspension of sales taxes.


The backbone of Russia’s rescue package for the auto industry has been a subsidy offered to banks for lowering the price of car loans. But car dealers have said it is failing to attract buyers in significant numbers, even though the state extended the subsidies to a broader range of cars in early July.