RUSSIA: Government to plough US$8bn in automotive subsidies

By Simon Warburton | 24 January 2014

Russia is to provide subsidies to domestic automakers worth US$7.8bn to 2016 as the country sees its hitherto booming vehicle sector's performance dip slightly.

Figures from Russian specialist organisation, the Association of European Businesses (AEB), show full-year sales of new passenger cars and light/medium commercial vehicles fell 5.5% to 2.78m units - below the previous year's record level.

The forecast from the same organisation for 2014, estimates numbers to be marginally below those for last year at 2.73m units.

The substantial grants on offer originate from the Russian Ministry of Industry and Trade and are targeted at R&D, testing, meeting Euro 4 and Euro 5 standards and maintaining jobs, among other sectors, but are also aimed at supporting automotive manufacturing in Siberia and the Russian Far East.

"The signed resolutions establish rules for disbursing Federal Treasury subsidies to partly cover related expenditures made by automotive manufactures starting from 1 January, 2014," said a statement from the Russian Ministry of Industry and Trade.

"The decisions made are aimed at achieving, by 2020, the following targets set in the automotive industry sub-programme, of the state programme, Advancing Manufacturing Industries and Raising Their Competitiveness: raising the share of VAT in the sector to 48% (RUB2.2tn); bringing the production of domestic cars to 3.1m per annum; of commercial minivans to 280,000; of trucks to 280,000; and of buses to 35,000.

[Also] "Bringing the share of Russian-made motor vehicles [on] the domestic market to 80% for cars, 90% for commercial minivans; 85% for trucks; and 99% for buses; building up the car fleet to the level of 363 automobiles per 1,000 residents."

Joerg Schreiber, chairman of the AEB Automobile Manufacturers Committee, commenting on the 2013 figures said: "A strong finish in the final month of the year 2013, which had been rather difficult most of the time.

"No doubt the run-out of the car loan subsidy in December played a role in bringing more customers to dealer showrooms than in the months before - in addition to the regular year end peak and unusually mild weather."

Neither the Russian President or Prime Minister's office was immediately available for comment.