The Ministry of economic development and the Ministry of industry will develop a new method to support auto industry

Moscow. June 7. INTERFAX.RU – Ministry of economic development jointly with the Ministry of industry and trade plans to the end of the summer to develop a new mechanism to support the automobile industry in lieu of agreements for industrial Assembly and put it into action with roughly 2019, writes in Wednesday newspaper “Vedomosti” with reference to Director of Department of development of sectors of economy the Ministry of economic development Alexander Maslennikov. The effect of agreements about industrial Assembly expire in 2018-2020.

The new mechanism will not provide for preferential import duties (mostly zero) on automotive components, said Maslennikov. It is necessary for the development of local automotive components industry: the auto companies are now often more profitable to import parts. It also reduces the interest of global vendors to open factories in our country, to increase the localization of production, says the official. Besides, Russia can preserve the benefits. They should be repealed from 1 July 2018. It was one of the conditions of Russia’s accession to the WTO.

The automakers will retain access to all programs of state support of the industry – public procurement, concessional lending and leasing, payment of the recycling fee, and so on. In the past year for these purposes – excluding recycling fee – the budget spent almost 60 billion rubles of Annual support to the industry is expected to reach 65 billion rubles, follows from the project of strategy of development of the industry.

If agreement on industrial Assembly could sign up with a pool of investors and all concerned in their lineup, the new is expected to be signed with only one company and under a particular model. The starting location of a manufacturer shall be not less than 60%, said Maslennikov. Another option is 60% on average across models in the same class. However, 60% localization is one of the obligations of the parties to the agreements on industrial Assembly in addition to creating or increasing the capacities for production of 300-350 thousand cars a year and use local engines or transmissions.

Automakers will be required to increase the level of localization models, for example, up to 80%, said Maslennikov. It is this reference point is specified in written the Ministry of economic development the draft strategy of development of automotive industry until 2025.

Will and commitment to export development, the official added, but the measure is not yet defined. He reminded that the project of strategy of development of automobile industry, the target for export of cars – about 15% of their total production in the country. “But we understand that not all of this amount achievable,” he said.

The representative of the Ministry of industry and trade on the issues of the newspaper did not respond. “The government is interested in deepening of localization of components, here is we will provide state support, – said earlier the Deputy Minister of industry and trade Alexander Morozov. – The longer we extend the benefits on import of specific components, the longer investors will not invest in their localization”.

Loss of access to state support will be painful for the plants. According to the Ministry of industry and trade, using different programs in the past year in Russia was sold every second car.

Market leader – “AVTOVAZ” a new approach is not much danger. As told by his representative, the minimum localization of Lada models exceeds 60%, and the average level of 80%. Fully from import of components to go it is impossible, he says. The localization of some, such as electronics, “has no economic background”. Talking about it, and the staff of the other two automakers. The representative of “Hyundai motor manufacturing Rus” said that his company is interested in increasing the level of localization. Now the figure is 47%. The company would like to keep the benefits for imports of components. Under the WTO it is not possible, but the authorities will likely find another way to reduce the cost of imported components due to greatly reduced market, according to an employee of another automaker. For this reason, the abolition of benefits will not stimulate the emergence of component production orders of plants will not provide their normal load, he adds.

To support the automotive industry is shrinking, but not going away completely – for the industry in terms of reduced market this is good news, says the proposals of the Ministry of economic development the analyst of “VTB Capital” Vladimir Bespalov. Plus the state not only helps the plants, but also stimulates the increase of added value within the country, he says.