A long hard winter for Russia as Kremlin injects cash

A long hard winter for Russia as Kremlin injects cash

Russia is to inject RUB50bn (US$628m) into its domestic automotive sector as a plunging rouble and free-falling oil prices continue to exert huge pressure on consumer confidence.

The country's Association of European Businesses (AEB) posted especially gloomy numbers for December showing a precipitous 46% drop in passenger cars and LCV statistics, while figures for 2015 were 36% down.

"The Government resolution on the automotive industry support programme for 2016 has been signed," said Russian Prime Minister, Dmitry Medvedev.

"The programme aims at providing the basis for the resumption of growth of Russian carmakers. The total volume of financing will reach RUB50bn roubles."

The huge cash injection, the largest for any industry insists Moscow, reflects the seriousness with which Russia regards its automotive industry, with Medvedev's office claiming supplier manufacturers had contributed RUB45bn of investment to the economy with the market Europe's fifth largest.

"In 2015, the automotive industry received RUB43bn in state support," added Medvedev. "The programmes stimulating demand, which involved updating the car fleet and reducing car credit and rental rates, had a positive effect.

"Out of over 1.5m new cars purchased last year, over a third were purchased at a special reduced rate."

The Prime Minister's government is also claiming credit, "to a great degree," for its measures preventing production freezes and mass redundancies.

Part of that RUB43bn was aimed at stimulating demand through reducing car credit and rental rates. Of the 1.5m cars bought last year, Medvedev's office maintains more than a third were purchased at a reduced rate, a policy which will continue during 2016.

"We must urgently organise our efforts on replacing the imports of car parts," noted Medvedev's office. "We must ensure we have our own domestic chain of production from raw materials to the final product; create a list of car parts to start their production in our country; lay the foundations for the design of promising materials and parts. This is one of our key goals.

"We must be more careful in the evaluation of our export opportunities and promote our companies and brands on foreign markets. It is the global market presence that enables a national automotive industry to continue its steady development both today and in the long term."

Specifically, the money will be targeted towards reducing Russia's car parc age, while lower vehicle credit and rental rates programmes will remain.

Russian companies will also receive financial support on their investment credits, with the State allocating funds to regional authorities. This money will be used to purchase municipal service vehicles running on natural gas, as well as to purchase buses and trolleybuses.

"We will also launch two new projects," added Medvedev's office. "Under the first, the State will support exports of Russian cars and car parts by compensating a part of transport costs and expenses arising from the need to make Russian products conform to consumer standards.

"The second project will see a new stage of updating ambulances and emergency care vehicles. The Federal budget will cover these costs."