The Ministry of Industry and Commerce will allocate 64.1 billion for the support of automotive industry in 2017

The Ministry of Industry and Commerce will allocate 64.1 billion for the support of automotive industry in 2017

Reuters – The Ministry of Industry and Commerce has requested from the government to increase the financial support for the automotive industry to 64.1 billion rubles and to abolish the cash-for-clunkers programme within the frame of its proposal, according to Reuters.

More than 50 billion rubles have been allocated for the support of the automotive industry in Russia during the crisis in 2016, however, as recently stated by the Deputy Minister of Industry and Commerce Alexander Morozov, the financial value for a new set of measures may exceed 60 billion rubles in 2017.

The Russian car market has fallen for a fourth consecutive year, as a result of the economic downturn, weak ruble and the low oil prices. The sales of passenger cars and light commercial vehicles continue declining from the shrinkage to 1.6 million units last year, according to the Association of European Businesses (AEB).

Instead of the utilisation and trade-in programmes, which had a planned cost of 22.5 billion rubles in 2016, the Ministry of Industry and Commerce has proposed six support programmes targeted for different categories of the population and business people for a total amount of 27.3 billion rubles, as stated in the attachment to the letter of the Deputy Minister of Industry Morozov to the government, a copy of which is at Reuters.

The overall figure sums up to 64 billion rubles, as confirmed by a source from within the industry, familiar with the proposals of the Ministry of Industry and Commerce.

Reuter has confirmed the existence of the letter and its attachments in the office of the Ministry of Industry and Commerce. The ministry has not made a comment as of Thursday afternoon. The representative of the Deputy Minister Arkady Dvorkovich, who is in charge of the automotive industry, declined to comment.

Russia had started to support the automobile market using the cash-for-clunkers programme after the 2008-2009 crisis, providing discounts on the purchases of new cars from the budget, in return for handing the old vehicles for scrap. The programme discontinued in 2011, to be resumed in 2014 in a somewhat modified form.

Russian citizens used to be able to purchase any automobile manufactured by a local manufacturer, who signed an industrial assembly with the government irrespective of price, within the scope of the utilisation and trade-in programmes.

The new proposal made by the Ministry of Industry and Commerce puts a limit to the prices of automobiles to be purchased with a discount, according to the documents.

6 billion rubles will be spent on three programmes – “First automobile” (60,000 rubles subsidy on the purchase of the first automobile with a price up to 800,000 rubles, for citizens under 30 years of age), “Family automobile” (100, 000 rubles subsidy on the purchase of an automobile up to 1 million rubles, for families with three or more children, who have no automobiles) and “Social worker” (60,000 subsidy for public sector workers on the purchase of automobiles up to 800,000 rubles).

The source from the industry has told Reuters that a proposal has been discussed as to the limitation of the prices of automobiles in the “Social worker” programme to 700,000 rubles.

The Ministry of Industry and Commerce expects a sales figure of 260,000 passenger cars and light commercial vehicles within the frame of the three programmes.

The ministry has proposed the allocation of additional 3.8 billion rubles for discounts on tractor purchases (“Russian tractor”), 2.5 billion rubles for subsidies aimed at farmers (“Russian farmer”) and 3 billion rubles for small businesses (“Small business”).

The Ministry of Industry and Commerce proposes to double the support for exports, which may rise due to the devaluation of the ruble during the crisis, to 6 billion rubles from 3 billion in 2016.

The remaining 36.8 billion rubles proposed by the ministry have been distributed amongst the programmes, which were already in force in 2016. 10.6 and 7 billion rubles are planned to be spent on preferential car loans and leasing programmes respectively, limiting subsidies on leasing only to commercial vehicles.

A total amount of 9.7 billion rubles is planned to be allocated for the government purchases of school buses, ambulances and urban electric transport vehicles and additional 3.5 billion rubles for the support of NGV sales.

A number of car manufacturers proposed to abolish or increase the price limits for the targeted programmes, since their products are almost always outside the pre-set price ranges, as told by two sources from the industry, who are familiar with the proposals of the Ministry of Industry and Commerce.

The programme has a social orientation, but the means of government support are unevenly distributed amongst car manufacturers: some of them receive almost all the funds, while the other part remains without state support, says one of the sources.