Russian Auto Industry Faces 40% Collapse Without Urgent Support

Russia’s Ministry of Industry and Trade has sounded the alarm over a potential 40% collapse in the domestic automobile market by the end of 2025. Speaking at a Federation Council Committee on Economic Policy meeting, Industry Minister Anton Alikhanov confirmed that the ministry is preparing urgent measures to stabilize the sector amid a steep downturn driven by soaring interest rates and shrinking access to consumer credit.

“We are already seeing a serious decline—minus 28%,” Alikhanov stated, as quoted by Interfax. “But we are taking steps that we believe will allow us to avoid the projected 40% fall.”

According to Kommersant, the ministry is drafting new forms of targeted support for the automotive industry. Among the proposed solutions are adjustments to auto loan programs, government-backed incentives for buyers, and continued localization efforts for domestic production. The aim is to soften the blow of the Central Bank’s current interest rate of 20%, which has effectively frozen vehicle financing for much of the population.

The situation represents a sharp reversal from 2024, when the industry saw relative stability bolstered by state subsidies, an influx of Chinese brands, and pent-up post-pandemic demand. However, by mid-2025, that momentum has collapsed under the weight of macroeconomic tightening and reduced household purchasing power.

Russian car production, already struggling from years of sanctions, import disruptions, and brain drain, is now confronting a fresh contraction in demand. Consumers—facing tight credit, inflationary pressure, and economic uncertainty—are increasingly unwilling or unable to take out loans for new vehicles.

Analysts warn that without state intervention, car dealerships and manufacturers may face widespread closures before the end of the year.

In his remarks, Alikhanov emphasized that the ministry’s intervention is still under development, but hinted that a revised federal strategy could be presented within weeks. The Federation Council has expressed tentative support, though final measures will depend on coordination with the Finance Ministry and the Central Bank.

Meanwhile, auto sector executives are already feeling the impact. Sales data for May and June point to a steep drop in showroom traffic, and the used car market—once a pressure valve for affordability—has become saturated and volatile.

The potential 40% contraction would mark one of the worst years in the post-Soviet history of the Russian auto industry. If unaddressed, it risks further undermining industrial output, employment, and consumer sentiment in a fragile economy already stretched by defense spending and declining export revenues.

The stakes are clear: without aggressive state action, 2025 could be remembered as the year Russia’s auto sector veered off a cliff.