Russia’s AvtoVAZ Is Sinking in an Economic Crisis and a New Scandal with Dealers

AvtoVAZ – russia’s largest car manufacturer – has found itself at the center of a new wave of criticism. Despite billions in state subsidies, the company is experiencing a protracted crisis, and the situation is only getting worse with each passing month.

In the summer, the plant publicly acknowledged the seriousness of the problems. Mass layoffs began at the company, and salaries were reduced from 120,000 to 45,000 rubles. Staff were forced to sign a waiver of bonuses and allowances in order to cut costs. Some factories switched to a four-day work week, while production volumes were reduced due to a sharp decline in demand.

The E-Largus model turned out to be a complete failure – its sales are extremely low, and dealer warehouses are overflowing with unsold cars. The situation is no better with the second generation of the Lada Vesta – numerous steering failures have already led to injuries to drivers, and the National Automobile Union is demanding a large-scale inspection of the plant’s operations.

Despite the lack of competition and monopoly position in the domestic market, sales are not growing. Analysts point to deep structural problems within the company that have been ignored for years.

In addition to internal problems, the situation is affected by an external factor – the dominance of Chinese cars. Over the past two years, the rf’s car market has been flooded with Chinese brands offering more technically advanced and reliable models. Their market share exceeds half of all new sales, and dealers are increasingly refusing to cooperate with russian manufacturers, choosing more lucrative contracts with Chinese partners. This is leading to stagnation in the russian car market.

Against the background of economic decline, AvtoVAZ has launched another “initiative” that has already caused outrage among its dealer partners. The plant makes all official dealers sign a contract for the installation of a video surveillance system with a contractor chosen by the car manufacturer.

Each dealer needs to install an average of 12 CCTV cameras. Maintaining one camera costs 45,000 rubles per year. Across the entire network, this amounts to approximately half a billion rubles annually.

The most dissatisfaction is caused by the requirement to provide AvtoVAZ with round-the-clock access to cameras installed in the showrooms of official dealers, which are independent companies. Partners consider this a gross interference in commercial autonomy and a violation of market principles.

Officially, the plant explains that this is necessary to analyze customer flow and satisfaction levels. However, dealers claim that this is actually digital surveillance.

Analysts warn that such a policy will only deepen the conflict between the manufacturer and dealers, and will further undermine confidence in the brand in a market, which is unable to create modern products on its own without foreign partners and is completely dependent on state funding.