LONDON (Reuters) -Russian President Vladimir Putin ordered his government on Thursday to come up with new measures to support the domestic car industry, which has seen sales crater since Moscow launched its invasion of Ukraine.
Amid a crunch on demand from Russian buyers and severe logistics problems as a result of Western sanctions slapped on Moscow, car sales slumped a record 83.5% in May, according to figures from the Association of European Businesses (AEB).
“I would like to ask the government to tell us in detail what swift measures it is taking to support the auto industry and stabilize the internal market,” Putin said in a meeting with government officials broadcast on state TV.
Putin also said the government needed to look not only at production issues, but also at how to stimulate demand despite the economic difficulties facing the country.
According to Russian statistic agency Rosstat, car prices have jumped nearly 50% since the start of the year, slamming demand in a country where household incomes have declined while inflation has been hovering near 20-year highs.
In recent weeks a string of Russian officials have warned about a possible demand slump in the economy that could accentuate the economic crisis, already expected to be the worst in at least two decades.
Despite a high-profile import substitution drive, Russia’s auto industry had remained heavily reliant on foreign investment and equipment.
Lada-maker Avtovaz, Russia’s largest car manufacturer, halted production for more than two months citing a shortage of electronic parts.
French auto giant Renault struck a deal in May to sell its majority stake in Avtovaz to a Russian science institute, reportedly for the symbolic sum of just one rouble, with a six-year option to buy it back.
(Reporting by Guy FaulconbridgeEditing by Gareth Jones)