Russia to Stabilize Ruble, Protect Global Automakers

ST. PETERSBURG – The Russian government, trying to end a prolonged slump in auto sales, will try to protect foreign automakers operating production facilities in the country against devaluation of the ruble.

The Ministry of Economy says it is taking unspecified steps to include fluctuations in the value of the ruble and other currencies in determining the percentage of locally sourced components required in foreign automakers’ car-assembly operations.

Under a 2005 agreement with the government global automakers are entitled to duty-free imports of automotive components while increasing localization to at least 60% by 2020. The level of localization is determined by the customs value of imported auto parts and the pretax cost of manufactured cars.

The value of the ruble, however, has fallen some 150% since 2005, raising the cost of imported components while lowering the level of localization, putting the foreign automakers at risk of losing exemption from duties on imported parts of 15% or more.

Currency fluctuations have significantly depressed Russian auto sales this year. Light-vehicle sales plunged 42.5% in March from like-2014 and first-quarter deliveries slumped 36.3%, according toWardsAuto data.

Foreign automakers appealed to the government to take steps to reduce their exposure to currency fluctuations and the ruble’s volatility in December. But the government did not respond until March, when General Motors ended local manufacturing and halted sales of both its volume models and Opel brand, leaving only niche products – Cadillac and the Chevrolet Corvette, Camaro and Tahoe.