Supporting the Automotive Industry in the Future must be Tied to the Production of Innovative Products

1 march 2018

"In 2017, budgetary funds in the amount of RUB 154 billion were allocated for supporting the automotive industry. The share of the automotive industry in the total budgetary expenditures for supporting the national economy is constantly rising, having already reached almost 7%," said Analytical Center expert Grigory Mikrukov speaking at the Automotive Business Forum FORAVTO-2018.

On the one hand, such a large share is evidence of the importance of the automotive industry for the country, but on the other hand, it can also be interpreted as a signal that the government expects to see good returns on these measures of state support, Mr. Mikrukov believes. According to the expert, at some point the automotive sector must demonstrate a breakthrough and financial self-sufficiency.

At the moment the state is subsidizing the automakers to allow them to manufacture more environmentally friendly vehicles, with some subsidies taking the form of disposal charge refunds for Russian automakers (RUB 63 billion). It is to be expected that measures aimed at promoting the manufacture and use of environmentally friendly and innovative vehicles will continue to expand. According to Mr. Mikrukov, in Russia emphasis will most likely be placed on the support of manufacturers offering innovative transport solutions and development of infrastructure.

Developed nations use a variety of measures to encourage consumers to use electric vehicles. These include, among other things, free parking lots for e-vehicles, dedicated E-vehicel lanes and free use of toll roads. In addition, subsidies are offered to cab companies willing to buy E-vehicles for their fleet. Another way to push people towards e-vehicles is by imposing stricter requirements on car emissions.

According to Mr. Mikrukov, the kind of demand-incentivizing measures used in developed countries would not currently work in Russia. "According to our baseline forecast, by late 2025 there are going to be about 55,000 electric vehicles on the roads in Russia, currently we have about 1,500. E-vehicles are too expensive for the average consumer and the most popular E-vehicles that offer characteristics comparable to those of a car with an internal combustion engine – the Teslas – belong to a narrow luxury segment," the expert explained.  

In early 2017, the Analytical Center predicted 11% growth for the automotive market assuming the same level of state support. "Our forecast was seen by many as too optimistic but it proved fully true. In 2018 we expect 10–13% growth in the automotive market (assuming the overall economic trends remain unchanged). The worst case scenario, which envisions a sharp devaluation of the ruble, accelerating inflation and interest rates, is that automotive sales will remain at the same level as the previous year," Mr. Mikrukov summed up.

Photo: from open sources