AvtoVAZ, Russia’s largest car manufacturer, is increasing the price of its iconic Lada cars by an average of 9% blaming the weaker ruble for the hikes.
The Lada, or Zhiguli in Russian, is probably the country’s most iconic vehicle. First produced in 1970, the original Lada — the VAZ-2101 — with its box-like shape became an ubiquitous sight in the Soviet Union and the butt of many jokes at home and abroad.
Although AvtoVAZ officially retired the last of its Lada Classic series in 2012, a new series, the Lada Granta, has been the best-selling car in Russia over the past 11 months. The cheapest model now sells for 300,000 roubles ($US4,595), according to Reuters. However, with the ruble falling over 50% against major trading currencies including the dollar and the euro over the past six months the costs of materials and components have shot up.
Russian business daily Vedomosti reports that prices will rise from Jan. 15. The paper quotes Bo Andersson, president of the automaker, as saying: “We had hoped that the situation in the Russian economy would recover quickly enough [to avert the need for price hikes], but unfortunately it did not happen.”
The price hikes demonstrate once again that the cost of Russian sanctions are increasingly being felt by consumers through spiking inflation and higher interest rates. Core consumer price inflation in the country hit its highest level in half a decade in December rising to 11.2%, year-on-year, up from 8.9% in November.
Whether the squeeze on consumers continues depends on how quickly the oil price stabilises and the ruble exchange rate levels out. Unfortunately the signs still don’t look good.
On Tuesday West Texas Intermediate (WTI) crude dropped below $US45 dollars a barrel for the first time since 2009 sending the ruble plummeting 5% to over 66 rubles to the dollar.
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