Russia Resumes Car-Loan Subsidy Program

VIENNA – The Russian government is restarting a car-loan subsidy program in an attempt to boost new-vehicle demand.

In contrast to the loan-subsidy program offered from 2009 to 2011, which was valid for Russian-made vehicles only, the new plan includes imported vehicles in order to avoid breaking World Trade Organization rules.

The subsidy applies on loans for cars and light-commercial vehicles up to 3.5 tons (3.2 t) that do not cost more than RR750,000 ($22,827). The buyer must make a down payment of at least 15% of the vehicle’s price. The loan period is limited to 36 months.

“The program of subsidized loans does not mean subsidies for the car industry. It means primarily subsidies for our consumers, those people who will buy cars but are not able to do it for some reasons,” Deputy Minister of Trade and Industry Alexei Rakhmanov, is quoted as saying.

Rakhmanov expects 180,000 to 200,000 cars to be sold with the help of the new program based on the current funding, but he declines to provide information about the amount of money being made available.The real impact on the market likely will be less significant, however, because some of the cars would have been purchased anyway, even withot the incentive program.

While the program was launched in July and some cars already have been sold, banks have until Sept. 1 to confirm their participation.

While all Ladas made by Russia’s largest auto maker and market leader, AvtoVAZ can be bought with the help of the subsidy, only less-expensive models of global foreign brands are eligible because of the price limit.

Several foreign brands introduced favorable purchase terms for models eligible for the government car-loan scheme, including Ford with its Focus model.

More than 27,000 Ford vehicles were bought under the previous subsidized car-loan program in 2009-2011, with the Focus accounting for more than 25,000 units.

This year, 1,333,314 cars and light commercial vehicles were sold in Russia through the first six months, down 5.8% from like-2012.