The proposed subsidies do not have unanimous support from the government. Officials with the Ministry of the Economy, for example, believe ongoing state support could leave automakers without incentives to cut costs or improve product quality.
A Russian Ministry of Industry and Trade spokesman says the new rule governing distribution of 2017 subsidies is a response to a shortage of facilities where car owners can have their vehicles serviced.
Production is running below 50% of capacity in response to a sales slump dating back to 2012. Light-vehicle deliveries fell just 2.5% in October but were down 13.2% during the year’s first 10 months, according to WardsAuto data.
Government sources say Daimler could sign an investment contract committing it to localizing parts purchases, design new technologies and products and create new jobs in exchange for government tax breaks, customs relief and other benefits.
Global automakers have received subsidies and other benefits for localizing production by purchasing more Russian-made parts and expanding R&D activity in the country. But Russia has been unable to extend the agreements made before its 2012 admission to the World Trade Organization, as they would violate WTO rules.
The 50,000-unit-capacity plant in Vladivostok mainly will produce Mazda’s SkyActiv-G engines for export. Neither Mazda nor the government say whether output of Mazda6 and Mazda CX-5 models now built there will increase as part of the new investment.
Besides the U.K. and Germany, parts made by the Ford Sollers Russian joint venture will be exported to Ford’s Romanian plant, which produces B-Max compact vans and plans to begin building EcoSport compact CUVs about a year from now.
The Russian Ministry of Industry and Trade says the bulk of the subsidies will be allocated to manufacturers with the most sales, with a significant amount provided to automakers with the highest levels of localization.
GM reportedly plans to resume sales of its entire Chevrolet range in Russia (Aveo, Captiva, Cruze and Lacetti) that virtually ended when the automaker shut down its plant in St. Petersburg last year. The automaker disputes the news.
GM-AvtoVAZ displayed a new Niva concept at the 2014 Moscow auto show. But Russia’s financial crisis, marked by the ruble’s falling value and the effects of Western economic sanctions, prompted the JV to indefinitely suspend the project.
In 2004, SUVs and CUVs accounted for only 12% of the Russian market, but their share has more than tripled since then to 38%. Analysts predict the segment’s share soon will reach 40% and not fall below that mark for the next five years.
Industry and Trade Minister Denis Manturov says some global automakers may follow General Motors and Ssangyong and abandon Russia after their agreements to assemble vehicles in the country expire in 2017-2018.
We call out vehicles with problematic fit-and-finish, materials, ergonomics or unfortunate design choices. Each of these items resulted in points deducted as WardsAuto editors selected the 2016 Wards 10 Best Interiors.