Russian politicians say their manufacturing Crisis Management Plan to deal with the fallout from the current array of economic tensions battering the country and sending auto sales plummeting, will help prevent “social tensions.”
A toxic cocktail of high inflation, soaring interest rates, a devalued rouble and international economic sanctions, combined to send the Russian automotive market sliding by 38% in February, but recent currency rallies and a slightly more stable political environment have at least given grounds for cautious optimism.
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Sanctions have been introduced by Washington and the European Union in a bid to dissuade what some see as Russian political involvement in East Ukraine, as well as send a powerful signal of disapproval at Moscow’s annexation of Crimea last year, with the measures appearing to bite.
“We think the government should generate demand, this is what the government should do with its stimulation programme,” said Duma Expert Council Innovative Development chairwoman, Alfiya Kogogina, at the recent Russian Automotive Forum in Moscow.
“What does the government do? The government has the Crisis Management Plan and support [s] domestic manufacturers to prevent social tensions. We saw from our recent history the market has cyclical reductions.”
The Committee chairwoman did not outline what she meant by “social tensions,” but added cryptically some measures recommended in the crisis plan “were not included” although she noted there would be further, although unspecified “additions and modifications” to the scheme. “I hope this will really happen,” she said.
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By GlobalDataThe Kremlin is looking to use RUB15bn (US$271m) of automotive subsidies in six months this year as Moscow aims to boost vehicle sales by 200,000 in 2015, while it has also announced the imminent launch of a low interest loan programme to kick start the market.
Kogogina highlighted the ambitious aim to double the size of the domestic automotive industry, despite the succession of economic challenges currently besetting Russia.
“The Russian automotive industry employs around 400,000 people and in related industries [there are] around 4m jobs,” she said.
“Around 9% of steel is purchased by the automotive industry [and] its share in Russia’s GDP is more than 1.5%. According to the strategy for automotive industry development, we have to double this figure.
“The industry is one of the most competitive industries in Russia today. I am not going to go on an impression everything is fine – this is not true. In 2014, unfortunately the market continued to decrease and this time it was around 11%. Production levels dropped by 13% and of course this is largely due to the overall reduction of economic growth, devaluation of the rouble, high interest rates for car loans [and] high rates for OEMs.
“Because of sanctions and political difficulties in September, the market dropped by more than 20%. The situation somewhat stabilised thanks to the government cash for clunkers [scheme], which the government spent almost RUB13bn (US$235m) on.”
Russian Transport Department director, Alexander Morozov recently said The Kremlin would make around RUB5bn available for modernisation, not only for OEMS, but component manufacturers as well.
