July 22 (Reuters) - Russia's largest carmaker Avtovaz

on Tuesday said it may shorten its working week to

four from five days, a rare move from a major state-owned

employer, as high interest rates and competition from China

squeeze its sales.

Avtovaz, struggling to find enough car buyers, said last

month that it expects sales across Russia's car market to shrink

by 25% this year and has blamed the central bank's high interest

rates, which reduces appetite for car loans and raises

production costs, as a major issue.

Russia's key interest rate has been at a more than

20-year high for several months and the central bank has come

under pressure from government officials and business leaders to

reduce borrowing costs more quickly. The bank is

widely expected

to cut rates by 200 basis points to 18% on Friday.

"We are talking about the high key rate and tougher

demands from the regulator for borrowers on car loans," Avtovaz

said in a statement. "In addition, a significant number of cars

have been imported into Russia, with imported brands pursuing a

policy of price dumping."

Avtovaz employs more than 30,000 people, mostly in

Togliatti, a city on the Volga river 800 km (500 miles)

southeast of Moscow, but does not disclose specific numbers. Its

sales fell 25% to 155,481 units in the first half of this year,

according to Autostat.

The company switched to a four-day work week for three

months in 2022 after Western sanctions were imposed over

Moscow's invasion of Ukraine and foreign automakers left the

market. Sales of its flagship Lada car dropped by 48.2% to

174,688 units that year.

Russia's domestic production had relied heavily on

foreign producers and the market slumped in 2022 before the

rapid arrival of Chinese carmakers helped revive the sector.

Chinese rivals now account for more than 50% of sales in

Russia, up from less than 10% before the war started.

"The final decision about introducing a part-time

four-day work week regime will be made following analysis of

market trends and economic factors, including the level of the

key rate and the availability of credit products," Avtovaz said.

Should it be implemented, the shortened work week would

start in late September.