Prime Minister Vladimir Putin said on Tuesday that Russian Federation will extend its car scrappage scheme into 2011.

The government would channel an additional 5 billion roubles ($177.1 million) into car scrappage scheme, the government said on its Web site.

The scheme, which awards 50,000 roubles ($1,751) to drivers willing to trade in models more than ten years old, has done much to revive sales of locally produced cars, mainly AvtoVAZ’s (AVAZ.MM) Ladas, following its introduction in March of 2010.

Russia was on target to overtake Germany as Europe’s biggest car market before the crisis, but sales halved in 2009 as consumer confidence collapsed and access to credit dried up.

Any Russian whose car was made in 1999 or earlier and had owned it for no less than one year can take part in the scheme.

Moreover, Putin said that the government plans to allocate budgetary money to fund a program of upgrading the truck and bus fleet.

“For the next three years starting from 2012, the Ministry of Industry and Trade wants 3.5 billion roubles a year to modernize the bus fleet, and 7.4 billion roubles to upgrade the fleet of heavy-duty trucks,” he said. “There are similar proposals in respect of agricultural machinery.”

Russian new car sales were up 77% in the first two months of the year, according to the Association of European Businesses.

AEB has said it is going to review upwards its current 2011 Russia car sales forecast of 2.24 million vehicles on the “strong start to the year.” Sales grew 30% to 1.9 million in 2010.


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