The government has approved a new structure for access to state support in the automotive industry

The government has approved a new structure for access to state support in the automotive industry


 

Kommersant.- The government has adopted new rules on accession to state support in the automotive industry, in the form of a scoring system based on the calculation of localisation of the vehicles, approved by the Resolution No 661 of May 25. In particular, the document establishes the threshold for access to SPIC, giving tax benefits in return for investment. According to the vice-PM Dmitry Kozak, all manufacturers must sign the SPIC by July in order to gain access to industrial subsidies (de facto compensation of utilisation fees), without which, production in Russia would be unprofitable. However, the deadline has not been given yet.

In accordance, the investors, who plan to sign the SPIC after July 1, will be obliged to collect a minimum number of 7,000 points for 90% of the manufactured vehicles in any of the years of the contract. For example, under the current minimum conditions of the SPIC in the passenger car segment, welding and painting bring only 900 points and the maximum number of points required to gain access to state procurement will become 5,500 – 5,800 as of 2025, depending on the segment. The highest requirement will be on trucks segmen. It should be noted that the new operation requirements are formally the same and covers all vehicle segments – cars, LCVs, trucks and buses – however, the threshold for eligibility to state procurement is set separately for each segment. The maximum possible amount of points is 7,000, excluding research and development, which is estimated at 200 points for every 0.5% of relevant revenues. According to the decree, the types of government support such as corporate competitiveness programmes, which will give preferential access from 2020 onwards, for example to subsidies on transporting products abroad, will be the easiest for the manufacturers to apply for. They are considered as the industry’s most effective tools to support exports. The required number of points is 900 in 2019, in other words, welding and painting will be sufficient, rising to 1200 as of 2022 and a minimum number of 1400 as of 2025.

The minimum level of access to public procurement is set at 2000 points, which is equivalent, for example, to the production of engines and gearboxes and body stamping. It is assumed that the points are not only awarded for the execution of operations, but also due to the presence of such obligations in the SPIC.

As stated by the government, from now on, the manufacturers will be able to define a specific list of components and corresponding points to gain access to the state support programme, which will allow the car makers to plan their localisation programs more flexibly and make the distribution mechanism of state subsidies as transparent and open as possible.

The members of the industry are of the opinion that the document sets the correct vector for localisation, however, the overestimated target points on public procurement seem to be unattainable for even the deeply localised Russian manufacturers. As a result, the purchases of Russian products with a high proportion of imported components, counterparts of which are not manufactured in the country, may potentially stop. In the end, not only the manufacturers will suffer, but also the government institutions and agencies, which will lose the opportunity to purchase socially important equipment.

The analysts, on the other hand, state that the current capacity in the automobile market is underutilised and the incentives created by the government to attract new investors do not make sense. The fulfillment of the existing capacities is the main task today, increasing the level of localisation at the same time.