ANNOUNCEMENT 23 Apr 2010In April 2010, the government of Russia announced a new commercial policy plan.
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The Russian government approved the car-making industry development strategy until 2020. The strategy outlines in detail the grandiose plans for Russia's carmakers and their foreign partners. The plan starts off describing the situation in the domestic auto industry as "ambiguous." The state of the industry, especially in the passenger car segment, is "critical" and will completely disintegrate in three to five years unless the government takes decisive systematic measures.
The Russian government plans to invest US$6 billion in its domestic automotive industry by 2020 as it looks to modernize and improve the competitiveness of the domestic industry's infrastructure. The Russian government sees around US$60 billion being invested in total during the period in question but with the majority of that investment coming from foreign and domestic businesses and automotive component suppliers.
The Cabinet estimates the capacity of the car market in Russia will increase to 3.6 million units a year, with the share of imported cars at 20 percent, and exports at 8 percent. The strategy introduces stimuli for the demand, tax and insurance measures, tariff and non-tariff stimuli, and measures to support domestic auto makers. In addition, it provides for stimuli in high-tech productions, subsidized interests rates on loans, five-year deferment on loans, state guarantees for loans and setting up a research infrastructure.
Russian domestic producers are expected to get by 2020 up to 80% of the Russian domestic market for light cars, up to 97% of the domestic market for tracks and up to 99% - for buses.
The government's decision to pour unprecedented funds into a mostly Soviet-era technological base rather than opening the borders and making foreign cars affordable is dictated by social pressures and interest in economic security. The restructuring the auto industry is part of Russia's long-held goal of diversifying its economy away from its current dependency on natural resources.
Prior to its crash in 2009, the auto industry contributed about 1 percent of gross domestic product, and its share should grow to 2.38 percent by 2020, according to the Cabinet's plan. The government expects the market to return to pre-crisis levels by 2013-14. Return on its investment is expected within five to 10 years.