Russia will increase annual car production by 300,000 units from January, 2006, vice-prime minister Ilya Klebanov said this week, according to a report from the Itar-Tass news agency.

Following a Kremlin meeting on automotive industry issues, Klebanov said that the extra production would meet expected Russian market demand.

He added that the meeting approved measures to develop the vehicle industry which should encourage production of new Russian-designed models.

However, Itar-Tass, said, Klebanov also noted the current lack of investment in the automotive sector.

Citing the fact that the GAZ car plant currently pays for 4.5 million square metres of housing, Klebanov told reporters that the Russian government would finance regions to relieve car makers of social expenses unrelated to their industry.

Car makers' debts would also be restructured, Klebanov said, adding that 51 percent of the state-owned shares in the Avtovaz car plant would be used to attract investments.


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The Russian government also plans to ban the import of foreign-built cars made more than seven years ago. (Russia is a major importer of used cars from western Europe and Japan.)

There are plans to introduce special customs duties for such cars that will "make the price of an old car equal to the price of a new one", Klebanov said.

According to the Itar-Tass report, president Vladimir Putin, who chaired the meeting, said that Russia would soon take measures to protect its car market.

He said this was a priority to which "the state must pay attention" because it affects the interests of a large number of people who should have the opportunity to buy Russian-made cars at affordable prices.

Planned European Union [end-life directive] rules would saturate the market with old cars, Putin said, as he recommended that meeting participants think about the possible consequences of this move.

But, Itar-Tass said, Putin believes that the state should not "close the market" because it will only do harm.

"We have no right to limit possibilities for buying foreign made cars", he said, adding that the market should be "fair, honest and competitive".

Putin also spoke critically of the fact that "yesterday's automobiles" are still being produced in the country, the Itar-Tass report said.

There are also still only 135 cars per 10,000 people in Russia, three to four times lower than in developed countries.

As the average age of half the cars in the country is more than 10 years, the president believes that demand for cars will grow in future, Itar-Tass said.

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