Russia’s automotive sector has emerged from the crisis of the past four years due to “serious support,” which reached more than US$1bn alone last year from the government say Kremlin politicians as the country continues its slow recovery.
Figures from the Association of European Businesses show sales last month of cars and light commercial vehicles in Russia increased by 13.9%, with market momentum continuing at a “robust pace” according to the Moscow-based organisation.
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Four years ago Russia numbers were catastrophically affected by a cocktail of international sanctions, low oil prices, soaring inflation and credit access difficulties, but apart from continuing foreign opprobrium, the economic outlook has significantly improved, coupled with a major stimulus from The Kremlin.
“The industry has come out of the crisis due to serious government support that has been [given] in the last several years,” said Russian government automotive industry and railway machinery head of department, Denis Pak at the recent Russian Automotive Forum organised by Adam Smith Conferences in Moscow. “In 2017 alone, that was RUB68bn (US$1.1bn) and this year we plan to spend RUB10.5bn.
“Additionally we are financing export opportunities but there is no specific amount allocated there. For future development of the industry we need to endorse new approaches – [for example] we have a lot of key components and some production opportunities that have to be the target for manufacturing companies. We are making internal combustion engines, gearboxes and steering systems.
“Localisation level is up to 50% and the amount of cars made in Russia is 85% – last year we saw increased sales to 1.6m vehicles. We have also set the goal to bring the level of R&D up to 5% of revenue. This should allow companies to expand their component base.
“There is another condition – increasing exports. By 2025 we plan to increase [exports] by RUB5bn – there are existing mechanisms to support that opportunity. We are additionally working on new tools that have been reflected in this strategic development. There are new prospects for electric, connected and driverless vehicles. We have recently developed a road map which we have taken to the government that should help new types of vehicles to find a market in the country.”
Plans are being developed for the Russian automotive industry to 2025, which will see a focus on new technology competences and adapt existing norms such as Decree 166 mandating a certain level of localisation.
This will also include vital small and medium sized enterprises, which will be able to access funding.
“A draft strategy to 2025 for developing [the] automotive industry is intended to acquire new technology competences which are currently lacking in the Russian Federation,” added Pak. “As the government we are ready to help businesses to invest in this and provide additional support. Whether it is a small company or big company is not really important.
“We help companies invest in R&D – subsidies up to 80% or even 90% – using Russian raw materials for components. One of the goals we set is to increase the added value in Russia per unit because this will provide us with [a] development boost.
“As far as the metal industry is concerned, we are currently working on a joint programme for the automotive industry and metal industry. We have two research centres currently preparing this programme.”
AEB members forecast total Russia market sales to improve by about 10% this year to a level of 1.75m.
