Russia’s industry and trade ministry wants to tighten conditions for foreign carmakers producing vehicles in Russia under the 'industry assembly regime', Kommersant business daily reported Monday citing a copy of a document outlining the ministry’s proposals.

All foreign carmakers with plants in Russia operate under the current rules which allow them to import components at lower customs duty rates in return for a commitment to establish assembly facilities that include welding and painting within seven years as well as reducing the list of imported components by one third.

The automakers are GM, Toyota, Nissan, Ford, Volkswagen, Peugeot-Citroen and Hyundai, which plans to launch its plant soon. Russia’s Sollers, which assembles SsangYong and Fiat cars, and GAZ, which assembles the Volga Siber model based on a previous generation Chrysler platform, also operate under this assembly regime and AvtoVAZ will do likewise when it starts assembling Renault cars in 2012.

Volkswagen's Kaluga plant last October switched from semi knocked-down (SKD) to completely knocked-down (CKD) kit assembly under its regime commitment.

According to Kommersant, the ministry is now offering carmakers that already have plants in Russia to conclude new industry assembly agreements, which would encompass eight-year preferences for imports of car components. In exchange, carmakers should create facilities to produce 300,000 cars per year and 200,000 engines, as well as body panel stamping facilities and a Russian car development centre within four years. They should also reach a 60% level of 'localisation', which is calculated as the ratio of the combined customs value of imported components to the selling price of a car assembled from these components, within six years.

The ministry is also proposing to increase foreign carmakers’ investments in Russian plants. The minimum size of investments for carmakers that already have plants in Russia is to be set at US$500m compared to $750m for those who are only starting production in Russia, under the ministry’s proposals. Previously, the average size of investments in production in Russia amounted to $150m–$200m.

The ministry has already presented its proposals to car manufacturers and is now discussing them with the economic development ministry, sources told Kommersant. That mnistry, however, opposes the proposals and believes foreign carmakers would not like to conclude new industry assembly agreements with tougher conditions, one of the sources said. The ministry also believes the new proposals would support only Sollers’ project with Fiat and AvtoVAZ’s project with Renault, the daily said.