Local brands are benefiting from higher percentages of localization, price increases lower than those of foreign brands and state programs aimed at supporting demand, particularly those in the low-cost segment of the Russian car market.
The ongoing economic crisis in Russia may prompt the government to cancel tariff-discount agreements with other foreign parts producers and even global automakers failing to comply with local-content requirements.
Annual production capacity at Vsevolozhsk is 160,000 units, but Ford built just 30,000 cars there in 2014, laying off 700 employees as a consequence. Output for full-year 2015 is estimated at only 15,000 units.
A spokesman for Russia’s Industry and Trade Minister says most of the new subsidies will compensate local automakers for interest rates on bank loans and for losses resulting from currency fluctuations.
A spokesman says Industry and Trade Minister Denis Manturov endorses the tax break, as the automaker has suffered from the devaluation of the Russian ruble and an increase in the key rate of the Russian Central Bank.
According to automotive analysts ASM-Holding, employment in the Russian auto industry has declined 10.5% since May 2014, from 205,134 to 183,534 workers, and a new wave of layoffs may take place by the end of the year.
Audi Russia’s sales for the first eight months of 2015 totaled 16,359 cars, down 29.4% year-on-year, WardsAuto data shows. Deliveries by rival luxury automakers BMW and Mercedes-Benz fell 21.1% and 8.6%, respectively, in the period.
GM estimates the overall cost of closing its Russian business at $600 million, with a significant portion earmarked for reimbursing former dealers for their investments. But some dealers have filed lawsuits claiming the compensation is inadequate.
“We have great respect for Daimler and we hope that it will build its plant in the territory of St. Petersburg,” city official Maxim Meyskin says. “However, the project should not be implemented at any price, which is our fundamental position.”