Russia Hopes Transport Subsidies Will Boost Exports

ST. PETERSBURG – The Russian government hopes to increase vehicle exports by making transportation subsidies more widely available to global automakers operating in the country.

Currently, subsidies range from 20% of transport costs for global manufacturers in Russia to 60%-80% for domestic brands and global companies whose level of localization – primarily parts purchases but also R&D spending – exceeds 50%.

The maximum subsidy of 80% is provided to domestic producers and global automakers with special investment contracts, whose terms include full exemption from federal and regional income taxes, accelerated depreciation of fixed assets and no-bid government contracts. Daimler recently announced it would build a Moscow-area plant after it obtained a special investment contract.

This year’s subsidies are worth a combined RR11.8 billion ($180 million), a level expected to remain unchanged in 2018 and 2019.

The Russian Ministry of Industry and Trade says car exports in the first quarter of this year increased 28% from like-2016, to 18,400 units. Truck exports rose 14%, to 2,900 units. Exports in recent years have ranged between 75,000 and 80,000 units, including 20,000 from domestic automaker AvtoVAZ.

Global automakers Volkswagen (Polo sedans for the Mexican market), the Renault-Nissan Alliance (Datsun cars for Lebanon) and General Motors’ joint venture with AvtoVAZ (Chevrolet Niva CUVs for Belarus and Kazakhstan) do not disclose export figures.

The government seeks to increase global automakers’ exports and levels of investment and localization by signing them to more investment contracts, with an eye toward doubling exports by 2019. Automakers can expect larger transportation subsidies under these contracts.