“Moskvich” acted as a local – Newspaper Kommersant No. 34 (7479) dated 28.02.2023

The Moskvich Automobile Plant again raised the problem of compensation for salvage fees, which is not fully implemented for the majority of manufacturers remaining in the Russian Federation. The company offers to provide 100% compensation in exchange for guarantees for the development of a new model range. AvtoVAZ, which is the only one in the passenger segment that receives full compensation, is categorically opposed and insists on additional subsidization of demand for Lada. Analysts, however, consider relief necessary for the development of the industry.

Moskvich (the former Renault plant) offered to guarantee full compensation for the scrapyard in exchange for the obligation to reinvest these funds in the production of a new model range, Tatyana Redko, director for interaction with government agencies and corporate relations, told the Federation Council (SF). “The issue of 100% compensation for scrap is important, including for our company, to cover the shortage of resources,” she said (quoted by TASS).

The salvage tax is levied on all cars on the Russian market, but local automakers are compensated for it through industrial subsidies. Since 2022, the amount of compensation has become completely dependent on how localized this or that model is recognized. 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.

In the fall of 2022, a similar idea was already discussed at the Ministry of Industry and Trade. Then the sources of Kommersant said that it was impossible to increase localization without compensation (see Kommersant dated September 29, 2022). At that time, there was no talk of an obligation to reinvest the salvage tax. But automakers have already signed special investment contracts (SPICs), which require investments in localization. For example, in November 2022, cars with internal combustion engines and electric drive were included in the SPIC of KamAZ, which is a technology partner of Moskvich. The Kommersant source clarifies that there are localization obligations there.

But AvtoVAZ is strongly opposed to any relaxations. The head of the auto concern, Maxim Sokolov, in his speech in the Federation Council, again pointed out the risk of expansion of Chinese manufacturers – we recall that the cars that Moskvich is now assembling are a model of the Chinese JAC. However, AvtoVAZ itself plans to assemble models from friendly countries at the former Nissan plant. Maxim Sokolov points out that “a low-localized assembly has the right to exist as a business model”, but fears that “we will slide into a screwdriver assembly within two to three years.”

Now, with the exception of AvtoVAZ and Haval, all projects in the Russian Federation in the passenger segment are assembly. Haval models produced in Tula also do not score enough points to receive a full refund of the salvage fee. The offer on the market is replenished with Lipetsk electric vehicles Evolute, Moskvich, and the production of Kaiyi at Avtotor has also begun. All these projects, as well as Sollers in the LCV segment, have localization plans. But, as Kommersant wrote on January 11, Maxim Sokolov believes that other players only “announce” localization, unlike AvtoVAZ. The interlocutor of Kommersant in the industry notes that full compensation for salvage fees will help level the playing field for new projects and give them an advantage over imports (including parallel ones).

According to another Kommersant source, AvtoVAZ is also concerned about parallel imports, since imported used cars often offer higher equipment for less or the same price as Lada cars. Recall that Lada still does not have an automatic transmission, ABS and other driver assistance systems. In addition, 3.5 billion rubles pledged for this year. for preferential car loans for cars with internal combustion engines, where AvtoVAZ was the main beneficiary, have already ended. Maxim Sokolov suggested redistributing the remaining 1.5 billion rubles intended for electric vehicles to cars with internal combustion engines. Kommersant’s source notes that AvtoVAZ may be against easing in compensation for salvage fees and due to the fact that the “surplus” of salvage fees is spent on state support for demand.

Automotive expert Vladimir Bespalov says that in the current conditions of insufficient supply, stimulating demand does not make sense: “It is better to support the creation of competencies, localization.” He notes that concessions on salvage fees can be given on the condition that localization requirements are met within a specific period. Sergey Udalov from Avtostat says that for the development of the automotive industry, it is necessary to localize cars, which is difficult to do without support. At the same time, he believes that state support for demand, even if it is concentrated on Lada, is needed, since it helps a highly localized product and all suppliers.

The Ministry of Industry and Trade has not yet outlined its position, but decided to postpone the payment of salvage fees for the first three quarters so that manufacturers have more working capital.

Olga Nikitina