Subsidies to give significant boost to domestic demand in the automotive market

4 may 2017 | Rossiyskaya Gazeta

"Automotive sales are projected to rise by 5 percent in 2017, reaching 1.7 million vehicles, with between 15 and 20 percent of that total, or 250-350 vehicles, being sold under fleet upgrade programs and on discounted and subsidized automotive loans, meaning that subsidies are expected to give a significant boost to the domestic demand in the automotive market," Analytical Center expert Daniil Nametkin told a Rossiyskaya Gazeta correspondent.

Daniil Nametkin
Daniil Nametkin
Department for Expert Analytics

It should be borne in mind that the government has allocated RUB 48.8 billion to provide various kinds of support to the automotive industry.  Direct subsidies to the automotive industry (RUB 17.5 billion plus RUB 7.4 billion for investment loans) should help it manufacture additional 250 thousand vehicles, while subsidizing the banks to offer discounted automotive loan interest rates (RUB 10 billion) and leasing companies to offer discounts on advance payments (another RUB 10 billion) are supposed to increase demand by 350 thousand cars and 41.5 thousand commercial vehicles this year.

The expert believes the subsidies will help sell every third truck in the country (sales of light commercial vehicles and trucks are expected to go up by 5%, reaching 153 thousand vehicles) as well as every tenth bus (their sales are projected to grow by 8 percent, reaching 11.2 thousand units).

According to the Bank of Russia, as of March 1 the automotive industry as a whole owed RUB 208.7 billion in bank loans and while giving RUB 7.4 billion in subsidies can help pay interest, it is not going to have much of an effect on the total amount of their debt, Mr. Nametkin believes.

Source: The Rossiyskaya Gazeta