At a recent Russian Engineering Union committee meeting, Bo Andersson, president of domestic carmaker AvtoVaz (pictured), said that import duties on foreign brands were still too low, despite the increases Russia has imposed to protect local production.
"We have to prepare protectionist proposals for the Russian government. As a foreigner, I can say that in some cases our import duty is too low," he said, speaking at the Committee for Development Cooperation and the Localization of Production in the Automotive Industry. "We need to realise the global trends in the automotive industry and to understand where we are: the automotive industry in Russia is one of the leading industries, and the number of workers in this sector is more than 700,000 people," he said.
Andersson referred by contrast to the United States, Brazil and China, which he said were actively protecting their domestic industries.
His comments follow similar ones made last year in which he proposed an increase in import duties, though the Putin government failed to act on the proposal saying it would have no effect on falling sales.
However, following GM’s decision to pull out of manufacturing in Russia because of those falling sales and, instead, rely on premium brand imports, Andersson may be forgiven for giving it a second go.
Russian authorities are concerned that the number of foreign carmakers plants in the country could follow GM’s example and switch to import supplies, although import duties on vehicles already range up to 25% or higher depending on vehicle types, and the country has for several years applied a 'recycling' fee on imported vehicles. Likewise, as GM’s decision to idle the plant rather than close it outright suggests, future production could resume once sales recover. Industry experts, meanly, have suggested that it is unlikely the Russian authorities will apply higher imports at this stage.
The head of the car loans department of the Russian bank Locobank, Andrey Ermakov, said that the increase in import duties would have a negative impact on the Russian market.
"It will probably not lead to the largescale drop of sales on the Russian market, but there may be other risks in the form of lawsuits from WTO members,” he said. He also pointed out that increased duties would benefit AvtoVaz and other localised carmakers, which compete with imported brands.
"Russia already has a schedule for tariff reduction agreed with WTO and I think that the government will not abandon it,” said Vladimir Bespalov, analyst at Russian bank VTB-Capital. “In addition, Russia already has a measure of protection in the form of the recycling fee, for which local producers receive compensation, while importers have to pay it. Therefore, given the relatively high customs duties, the domestic car market is now well-protected from large-scale imports."
Andrei Rozhkov, analyst at the investment and financial company, Metropol, also said that the increase proposed by Andersson would not be effective for helping mass-produced, economy brands. Currently, imports account for about 20% of the Russian market, and are mostly made up of premium class brands.
"Russia imports expensive premium and business class cars, those for which production in Russia is not justified because of low production volumes,” he noted. “So [the increase of duties on such cars] will not benefit AvtoVaz’s brand Lada,” he said.
