Car Sales Plummet 33% in January as Credit Dries Up

Sales of new cars in Russia plunged 33 percent in January, a leading business group said on Thursday, and predicted that sales will tumble by 40 percent this year as Russia enters a recession and cheap car loans dry up.

Data from the Association of European Businesses showed that a total of 116,899 cars were sold in January, including imported and Russian vehicles, down from 174,488 in January 2008 and 44.5 percent down from 210,293 in December.

AEB forecast total 2009 sales at 1.9 million vehicles, down from the 3.2 million, worth $69 billion, sold in 2008.

The government plans to spend $350 million on car purchases for officials this year and another $57 million on subsidizing interest on loans for cheap cars, mainly the ubiquitous Lada produced by AvtoVAZ, but has so far refrained from bailing out producers.

As local firms have yet to start benefiting from the weaker ruble, AvtoVAZ, Russia's largest carmaker, saw its sales dive 38 percent to 29,100 vehicles.

Sales among foreign brands like Chevrolet, Hyundai, Toyota, Nissan, Opel, Kia, Renault, Mitsubishi and Suzuki fell 30 percent to 50 percent.

Sales at Ford, in the third spot after AvtoVAZ and Chevrolet, fell 18 percent to 7,952 vehicles while some Japanese brands and more expensive European cars showed resilience.

Russia's second-largest car producer GAZ showed one of the sharpest falls of 60 percent.

GAZ failed to pay bondholders who presented its ruble paper for buyback under a put option, the bond organizer said on Thursday

GAZ, like many other carmakers in Russia, has already suspended assembly lines.

General Motors said on Thursday that it had restarted test assembly lines at its plant in St. Petersburg after a nearly two-month suspension.