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Automobile Industry Position in Russia

The Russian car industry experiences the most severe crisis of the last years. For the First Quarter of 2005 the sales of Russian automobiles have fallen down by 14 % while imported car sales have increased by one and half times. The car factories think that they will have no other way out but to assemble foreign cars.

In 2004, the car industry has shown an incredible growth. Russian domestic car sales have grown by 10 %, and foreign-made car sales doubled. Experts believed, that the explosive sales growth would continue, as the market had enough room for both domestic cars, as well as for foreign-made cars.

However, the miracle did not happen. According to domestic cars sales experts, the First Quarter showed domestic car sales plunged by 14 %. The sales of new imported foreign-made cars have increased almost two times, the sales of second-hand foreign-made cars increased by one and half times, the sales of "Russian foreign-made cars» increased by 17 %.

The discussion of Russia's automobile market problems and the development of domestic car industry became a hot topic. It is necessary to notice, that the discussion went from governmental offices into the streets of the Russian cities.

At first sight, the main reason for mass protest of motorists is the attempt to make right steering wheel cars illegal and to increase customs duties on second-hand foreign-made cars. However, the essence of the conflict is much deeper. The main issue is the crisis of the automobile industrial policies of our state.

We can speak about a more or less complete industry development strategy only since mid-2002 when the government approved the Concept of Automobile Industry Development in Russia. This document has been adopted actually in private and under heavy pressure of the Russian car manufacturers is a bright sample of eclectic bridging of opposite problems. On the one hand, they proposed integration of the country into global automobile market, on another tried to preserve the archaic domestic car industry and even creating greenhouse conditions for the latter. All these years the authorities are trying to do pleasant things for the motorcar giants that have barely changed since the Soviet times, and to do useful things to promptly growing peoples’ needs for reliable and safe automobiles.

The power of lobbyist efforts of representatives of the Russian car industry is much

stronger than foreign manufacturers’ lobby what forces us if not to trudge back, but to stay at the same point. Therefore, the reasonable decision to drop import duties for components and cars is adopted with a biennial delay, and the request to make the transition by 2004 to manufacture automobiles that are EUROS - 2 EURO - 3 ecologically compliant, has not yet been adopted. At the same time we see the debate of the proposals to restrict market competitiveness so that the interests of «Zhigulis" and "Volgas" manufacturers are preserved.

Meanwhile the demand for foreign automobiles grows steadily. In 2004 for the first time, the purchase of foreign-made cars has exceeded sales of Russian-made cars by sales volume. The «sitting on the two chairs" policy limit is practically reached. Now there is a problem of choice. Either to preserve the domestic car industry as it is now by shutting the country down for foreign-made imports, a significant increase (because of lack of real competition) of the Russian-made automobile prices, what is going to make road traumatism situation even more pronounced (taking into consideration extremely low safety levels of our cars) and, at the end, sharp growth of social tension. On the other hand, it is necessary to acknowledge that we are unable to catch up with the advanced automobile powerhouses of the East and the West, and, hence, we should simply borrow their technologies, by organizing the production of foreign cars in Russia, giving, thus, the option for each Russian citizen to purchase the car he wants, regardless of where it has been manufactured.

If one considers the first variant politically probable, he practically takes Russia on the road shoulder of world economic process, hurts the interests of the middle class and, what is the most important, does not rescue the domestic car industry, but only prolongs its agony. The other choice, certainly, is not quite without pain. However, here in Russia, a small sacrifice helps winning the game. A large-scale foreign investment into motor industry responds to the interests of consumers, workers, and the state. It is only unprofitable to the autooligarches that have got used to parasite from their monopoly position and take advantage of imperious protectionist policy.

Copyright 2005
Global B2B Network

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Written by: Sergey Talpa

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