Everything cooked by overwork – Kommersant

The Ministry of Industry and Trade plans to radically revise the approach to assessing localization in the automotive industry. Now the key operations mastered by Russian automobile plants for passenger cars are welding, painting and stamping, and their presence makes it possible to claim partial compensation for salvage fees. Now officials want to drastically reduce the assessment of these operations in terms of localization, highly appreciating auto components, some of which the auto industry never planned to produce in the Russian Federation. If the approach is adopted, even Lada models will begin to lose compensation, the industry believes, which will lead to an increase in car prices.

The Ministry of Industry and Trade has prepared changes to the 719th resolution on localization for the automotive industry, which involve a review of the number of points awarded for the production of components in the Russian Federation or the performance of certain operations.

The project, according to Kommersant’s interlocutors, involves a sharp decrease in points for technological operations, including welding, painting and stamping.

The released points will be awarded for the localization of other operations and components (up to consumables), which are not currently produced in the Russian Federation.

The localization of welding, painting and stamping has already required large investments from automakers, Kommersant’s interlocutors say. Welding and painting (for which in the current edition they give 900 points) in the passenger segment were the minimum requirements that, until 2020, allowed automakers to enter into special investment contracts with the government and receive full compensation for salvage fees. Now, compensations depend on the level of localization — from 2023, in order to fully compensate for the scrap fee, a manufacturer in the passenger segment needs to score 2.5 thousand points, which implies a very high level of localization. If the new approach is approved, the bar will continue to grow, and, as Kommersant’s source says, the target level will exceed even the degree of localization of basic domestic models, including Lada. Kommersant’s sources in the automotive industry believe that the cost of additional localization will lead to an increase in the cost of cars.

According to the new rules, welding, painting, stamping and a number of already localized components will give 1.7 thousand points less, Kommersant’s interlocutors say. A similar figure is given in a letter from the Association of Automakers of Russia (OAR) to the Deputy Prime Minister and head of the Ministry of Industry and Trade Denis Manturov (Kommersant has it). According to Kommersant’s interlocutor, the new rules will take away 1.3–1.5 thousand localization points from current passenger car models.

The OAR letter states that this approach devalues ​​previously made investments, and also potentially equalizes the products of Russian factories with imports, as, for example, it will complicate its access to public procurement and reduce the amount of compensation for salvage fees.

“Revision and a sharp decrease in points for technologies that make up a significant part of the localization level and are located directly in the perimeter of the activities of the car factories themselves will undermine the economy of all investment projects currently being implemented, and most importantly, will sharply reduce the investment confidence of the industry,” the letter says. The redistribution of points in favor of technologies that are not available in Russia looks like “an attempt to completely shift the problem of the development of the Russian component base” to the auto industry without additional funding and “under the conditions of depriving part of the reimbursable recycling fee.” Now the Ministry of Industry and Trade is preparing a new increase in salvage fees in parallel.

As a reaction to the appeal of the OAR, according to the interlocutor of Kommersant, the Ministry of Industry and Trade has so far only provided for a delay in the entry of new requirements. At the same time, the industry is waiting for the publication of the final draft. The Ministry of Industry and Trade told Kommersant that the corresponding package of amendments to the scoring mechanism is being discussed jointly with the industry community “in order to create conditions that stimulate the rapid development of the production of critical components for the domestic automotive industry.” But it is still too early to talk about a finally formed and approved position, they concluded there.

Automotive expert Vladimir Bespalov notes that the strategic task of obtaining all the competencies in order to produce cars under any conditions is correct, but the question is how it will be implemented. Firstly, there should be a transitional period with a clear understanding of the conditions and terms on the part of investors, and secondly, additional state support is needed, he continues. The expert emphasizes that there are components for the cost-effective production of which the Russian market is too small, so it is necessary to reach a compromise on output volumes and provide appropriate subsidies.

Olga Nikitina