Demand for the Lada, an Avtovaz car, has fallen sharply in the economic downturn [EPA]

The car plant, based in Togliatti in the country's south, has suffered sliding sales due to the economic slump.

"Today, 102,000 people work at Avtovaz. Such a number cannot guarantee effective and profitable production, therefore we have agreed to reduce the personnel by 27,600 people," Avtovaz said on Thursday.

Earlier the carmaker was reported to be considering cuts of up to 36,000 employees, but said it has been able to "significantly lower the initial figure".

Russia's car market had been set to become Europe's largest, before the downturn left thousands of people out of jobs and the credit crunch hit lending.

Avtovaz, which is 25 per cent owned by Renault, the French carmaker, has been losing money for years, with demand for its Lada sedan falling sharply in the economic downturn.

The company's sales dropped by 44 per cent in the first six months of the year, according to the Association of European Businesses in Russia.

Igor Komarov, president of Avtovaz, approved the latest layoff plan at a meeting with a trade union on Wednesday.

The carmaker said it plans to rehire 6,000 workers by 2012 for a new production line that it is developing with Renault.

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