Ask any Russian what they associate with the city of Togliatti and the answer is automatic: cars.
Tolyatti is the Russian Detroit, where Avtovaz is located, which produces the Lada, ubiquitous in everything Russia mainly because the brand is local and cheap.
If you want to get an idea of the impact of sanctions on the Russian economy, Avtovaz is a good place to start.
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Not that Avtovaz, again in the hands of the state, allows us to enter the factory.
The communication department was suspicious, convinced that it would be ridiculed for the fact that the most recent models came off the production line do not have airbags, air conditioning or anti-lock braking system.
We suggested that the clean models speak for themselves. We were not let in.
The Russian auto industry has been overthrown since Vladimir Poutine sent troops to Ukrainemainly due to price hikes, supply chain issues and nervous Western automakers finalizing their exit strategies.
Renault, which held a majority stake in Avtovaz, pulled out in May, returning its stake to the Russian state but with a six-year buyout clause.
Volkswagen, Russia’s biggest foreign investor, is reportedly looking for buyers for its Kaluga plant – and its workers there are laid off until the end of 2022.
Car sales have collapsed, down 75% from July last year according to the automakers committee AEB, with Avtovaz recording a 68% drop in sales over the same period.
Production at Avtovaz’s sprawling Tolyatti factory was halted in April and May but resumed in June.
Early Granta and Niva models rolling off the production lines after the break have already been upgraded to include GPS emergency alert systems which were initially missing.
The airbags are not yet installed, but they should be by the end of August. Anti-lock braking systems are expected to arrive from China sometime next year.
In June, Grigory Basovitiy of the Molot union in Togliatti gave an interview in which he gave an exhaustive list of spare parts that Avtovaz had difficulty obtaining.
“Today most of these issues have been resolved,” he tells us. Now the problems are logistics, getting parts from China or Kazakhstan.
“It is no secret that China has capabilities and technology and is now replacing what Europe has abandoned. We are already hearing from Western manufacturers that if they leave, someone something else will replace them. And now we see how it works.”
“It’s not like in Soviet times”
Many Western companies are in lockdown, their operations on hold or not.
According to analysis by strategy consultancy group Macro-Advisory, most of the companies that left were either small (i.e. in retail) or sold to local buyers (like Renault or McDonald’s that make the headlines).
“We calculate the hit to GDP at less than 1% as operational assets will remain in the country,” reads its latest research note.
“Russia is still part of the market despite the sanctions,” Azat Temirkhanov of automotive analysis agency Autostat told Tolyatti.
“It’s not like Soviet times when there was an iron curtain. We still have economic integration, we just need to rebuild supply chains.”
This is the message that the Russian state likes to project. But the doomsday predictions of those early months of sanctions headlines have dimmed slightly.
Avtovaz produces the Lada, ubiquitous throughout Russia mainly because the brand is local and cheap
“Here’s to your penalties”
The Central Bank of Russia has improved its forecast for GDP contraction this year, from 4 to 6% instead of 8 to 10%.
The International Monetary Fund revised its rate downwards from 8.5% to 6%.
The outlook is not great, the Russian economy is ready for extremely difficult times. But it’s not quite the economic death knell that some Western think tanks are proclaiming and Ukraine supporters may be hoping for.
Tolyatti has had its rough times before. The workers we spoke to were unhappy with the wages and the hoped-for return to the five-day week; sanctions seemed of secondary importance.
“You and your sanctions,” said Yuri Mukhoed, who has already been on furlough for two years and has worked for Avtovaz since the 1990s.
“There is no point in imposing sanctions on Russia. Russia is self-sufficient.
“We wanted to be nice, to unify the whole world around us, and now it turns out that nobody needs us. Well, if you don’t want us, understand this: Europe is now over, They’re going to survive the winter without Russian gas and oil? With firewood? They still need Russia. So much for your sanctions.
People relax in the Victory Park, built by Avtovaz
Tolyatti is the beating heart of Russia’s auto industry, the hardest-hit sector in terms of sanctions so far.
At the city’s Victory Park, a neat new urban development funded by Avtovaz to celebrate its 50th anniversary, teenagers play table tennis and basketball to the sound of Russian rap.
In another corner, couples are dancing salsa. The evening sun is setting after another scorching day.
At first glance, as Russians continue to enjoy their summer, you could be forgiven for thinking they’ve forgotten there’s a war.
