MOSCOW, Oct 6 (Reuters) - The Association of European

Businesses (AEB) has raised its forecast for the Russian car

market to 1.28 million units from 1.25 million it forecast in

July, citing a key rate cut and expectations of an upcoming

increase in the scrappage fee.

The sales volume will still fall short of last year's

results however, the AEB said, when it said 1.65 million units

were sold in Russia. If its latest forecast is accurate sales

this year would therefore drop by 22.5% compared to 2024.

Russia's car market plunged in 2022 after Western automakers

such as Renault and Volkswagen left the

market after Moscow sent tens of thousands of troops into

Ukraine. That paved the way for Chinese brands to capture a

dominant market share.

"The recent, albeit modest, key rate cut has already

stimulated activity across all capital-intensive sectors,

including the automotive market," Alexei Kalitsev, chairman of

the AEB's Automobile Manufacturers Committee, said in a

statement.

The Russian central bank cut its key interest rate to 17% in

September, continuing a series of rate cuts from a 20-year

record high of 21% in October 2024.

The upcoming closure of high-interest deposits will release

a significant volume of household funds, stimulating people to

spend more on cars, said Kalitsev.