MOSCOW: New car sales in Russia will drop 24.2 percent this year after falling more than 10 percent in 2014, the Association of European Businesses lobby group said on Thursday, as the country's economy heads for recession.
Car sales have fallen victim to Russia's weak economy, hit by Western sanctions imposed on Russia over the Ukraine crisis and low oil prices, and people have delayed making large purchases.
Joerg Schreiber, chairman of the AEB Automobile Manufacturers Committee, said demand would be hit this year by high inflation and interest rates, and because people rushed to buy cars last year to avoid inevitable price rises.
Car manufacturers increased prices last year and this year after the sharp decline in the rouble, which fell 40 percent last year and has weakened further since.
"The spike in demand at the end of 2014 will literally provoke a collapse in sales," Schreiber said.
New car sales were up 2.4 percent in December, year-on-year, AEB said. Schreiber said some car models may be forced out of the market, but declined to name which.
The faltering rouble prompted Russia's central bank to hike its key interest rate by 650 basis points to 17 percent last month and some officials expect inflation to peak at 15-17 percent in March-April this year.
Russia's largest carmaker Avtovaz said it was forced to increase prices this week for the country's most popular car, the Lada, by 9 percent because of the plunging rouble.
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