The country will support its internal auto producers with a 10 billion rubles ($166 million) subsidy strategy, according to a recent government announcement, aiming to support the struggling industry that was hit by the economic collapse.
The measures announced on Thursday are still widely viewed as insufficient for an industry that has incurred major losses last year and is only expected to return to profit next year. Car deliveries in Russia have dropped massively because of the recent economic downturn that started back in 2013 – with buyers shunning major purchases and the carmakers are looking for cost cut strategies and rethink their plans for what was once seen as a market capable of overpowering Germany to become Europe’s biggest car market. “Most carmakers currently work with a minimum profitability level … (The) budget allocation of 10 billion roubles will allow (them) to utilise additional production capacity in the first quarter in the amount of around 110,000 vehicles and preserve jobs,” commented the government on its website.
According to official figures coming from the state statistics office, production of passenger cars in Russia dropped 17 percent last month to around 130,000 units. The government is now considering the increase of allocated funds to its car-subsidy program introduced in 2014, with the incentive schemes offering discounts to buyers who trade in an older vehicle for a new one and can also subsidy loans and leasing deals. The automakers implicated on the Russian market have seen, besides falling sales, as earnings margins get eroded by the massive plunge of the country’s currency that brings increased costs for imported components and vehicles, together with increased prices for raw materials.