AvtoVAZ, the largest auto manufacturing company in Russia, posted RUR2.6 billion ($80.7 million) in net losses in the first half of 2013, compared to RUR27.4 billion in profits in the same period in 2012. The carmaker’s dismal financial performance in the first six months of 2012 has been attributed to the economic slowdown in Russia, which in effect resulted to the slump in vehicle demand in the carmaker.
New-car sales in Russia have dropped for six straight months. The Association of European Businesses (AEB) lobby group recently revised downward its sales forecast for the full year 2013 to 2.8 million vehicles, reflecting a drop of 5 percent year-on-year. While this year’s first-half net loss came from lower car sales and increased investments in new models, profit in 2012 was heavily boosted by a non-cash gain from discounting the cost of future debt payments.
As a result of lower sales, AvtoVAZ logged a 7-percent fall in revenue year-on-year to RUR83 billion. The Russian carmaker had earlier said that its sales in Russia slid 10 percent in the first half of the year to 226,729 units. Western carmakers like Ford Motor Co., General Motors and Fiat Group have made heavy investments in Russia in the past years, wagering that the vehicle market will surge as owners update their units.