AvtoVAZ risks losing market due to price increase

Despite having Russia's three top selling cars in its product range, AvtoVAZ is losing market share, and its recent financial results have been disappointing. Analysts say the company needs a strategy overhaul to regain popularity.

Disposable incomes are on the rise in Russia, but cheap Ladas are still the most popular cars on the market. The best-selling new model is the Lada 2105 which accounts for nearly 13% of all new cars sold.

But in September AvtoVAZ, producer of the Lada, put its prices up, leading sales to fall. The car-maker may not be able to find buyers for all the cars it's producing and could be forced to stop its assembly line until January 15.

On top of this, the company is facing tough competition from abroad. French automobile producer Renault has already entered Russia's lucrative low-cost car market with the Logan model, which costs less than $US10,000.

AvtoVAZ is looking for ways out of crisis, issuing bonds for $US5 BLN in 2007, and attracting a foreign partner, Canadian parts manufacturer Magna. The company still has time to make some improvements before Russia joins the World Trade Organisation, which is due to take place next year.