Russia economy meltdown as car sales plummet sparking 'overcooling' warning

Russian entrepreneurs are reportedly worried about the state of the country's economy (Image: Getty)

Entrepreneurs and experts have sounded the warning over a "stagnation" in Russia's non-military industries, including car production, as the country continues to grapple with a growing economic crisis. Alongside blows to the Russian motoring industry dealt by inflation, sanctions and high interest rates, there has been a dramatic drop in the number of cars being produced in the country, according to the newspaper Nezavisimaya Gazeta. "The mood in the business community is getting worse," the daily paper warned, amid a policy of "overcooling" rather than "controlled cooling" of economic activity.

Experts from the Centre of Macroeconomic Analysis and Short-term Forecast also warned Vladimir Putin that the country was suffering from "a drop in food production, falling rates of coal extraction, construction materials, metals and farming machinery". Despite the increasingly dire situation back home, Moscow has shown no signs of slowing down in its bombardment of Ukraine, with the highest number of drones and missiles fired in the territory since the full-scale invasion this weekend.

Russia's car industry has taken a heavy blow from the ongoing Ukraine war (Image: Getty)

Earlier this month, a report by the Stockholm Institute of Transition Economics (SITE) revealed the increasingly precarious position of the Russian economy as money continues to be funnelled into Ukraine amid continuing Western sanctions.

The report said that the country's economic situation was only superficially stable, shrouded in "opaque financing, distortionary resource allocation and shrinking fiscal buffers", with these underlying structural issues steadily becoming harder to ignore.

It also laid bare the extent of Russia's motoring industry crisis, with a dramatic shift from Western car imports to domestic production and Chinese-produced vehicles – both creating quality concerns.

As high prices filtered down to the consumer level, households have also had to cut spending, including on car purchases, with the sales of new motors dropping by 25% in the first quarter of this year compared to 2024.

Despite a government loan programme aimed at boosting sales, the figures betrayed the vulnerabilities ingrained in the wartime economy – with 70% of car purchases linked to borrowed money in 2023.

It has also emerged that food prices in Russia have soared in the past year – with a jaw-dropping 166.5% rise in the prices of potatoes from 2024, according to state statistics agency Rosstat.

Market analysts at Romir estimated that the average Russian household was spending 34.6% of its income on groceries in April 2025, the highest level since the conflict escalated in February 2022.