(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.