The Ministry of Industry and Trade has developed a new strategy for the development of the automotive industry

The Ministry of Industry and Trade has prepared a draft government decree approving a new strategy for the development of the automotive industry until 2035. Vedomosti got acquainted with the document, the authenticity was confirmed by a representative of the department. He clarified that national automakers and FSUE NAMI also worked on the strategy. “After publication, the document will be finalized taking into account the opinions of interested parties,” the interlocutor added.

A new industry strategy, taking into account today’s realities, was instructed to be developed by President Vladimir Putin by September 1 following a June meeting with representatives of the auto business at the St. Petersburg International Economic Forum. But industry participants have previously noted that a new plan for the development of the automotive industry is needed. So, already in mid-March, the Russian Automobile Dealers Association said that the current strategy for the development of the automotive industry until 2025, adopted back in 2018, had lost its relevance.

The main goals of the new strategy are to meet the needs of the Russian market in cars localized by at least 80% and ensure the technological sovereignty of the domestic auto industry, follows from the document of the Ministry of Industry and Trade.

Since the beginning of the NWO in Ukraine, foreign automakers have suspended shipments of cars to Russia. Later, localized foreign players were forced to suspend assembly in Russia due to a shortage of components, which formed against the background of the destruction of supply chains. Now, in addition to national automakers, the Chinese Haval and “Avtotor“. According to Rosstat, the production of passenger cars in Russia in the first half of the year fell 2.6 times to 281,000 units.

The main objectives of the new strategy are to stimulate production and demand through state support, the creation of auto component production, mainly in the field of power units and active and passive safety systems. This will require 500-600 billion rubles. until 2035 and the same amount to support exports, the document says. For comparison: the total amount of state support for the automotive industry over the past five years amounted to 387 billion rubles. Basically, these were funds for programs of preferential car loans and leasing, subsidies for manufacturers for the development of gas-powered and electric vehicles, and for the purchase of various types of equipment at the expense of the budget.

The production priorities of the strategy include organizing the production of small diesel engines, automatic transmissions, anti-lock braking systems (ABS), and airbags. With the competitiveness of Russian technologies, they should be an absolute priority for car manufacturers, the authors of the strategy insist.

In order for Russian components to appear and become competitive in comparison with foreign counterparts, it is necessary to invest a total of 2.7 trillion rubles. in 2023–2035 in research and development (R&D), as well as in the organization of production of auto components, follows from the document. The main investment burden will fall on business, but state support will also be provided through various financial and regulatory measures.

According to the authors of the strategy, the automotive industry in Russia in 2016-2021. on average, they invested 0.2–0.5% of revenue per year in R&D. Now the task is to increase this figure to 3-4% of the annual turnover. “Support for R&D in the automotive industry and the production of auto components was carried out within the framework of industry-wide instruments, not exceeding 1.5–2 billion rubles. in year. Taking into account the insufficient level of R&D spending, this strategy provides for a significant increase in their funding,” the document says.

With the planned volume of investments in the production of auto components for 2022 in the amount of 24 billion rubles. by the middle of the strategy implementation period (2028-2029), this figure should already be 148-151 billion rubles. per year, and by 2035 – 190 billion. Investments in R&D for auto components should grow from 10 billion rubles. in 2022 to 82 billion rubles. in 2035. The authors of the strategy admit that due to the termination of interaction between Russian enterprises and foreign engineering companies in 2022, the implementation of R&D “will be associated with high costs” and longer development periods.

The representative of the Ministry of Industry and Trade clarified to Vedomosti that in 2015-2021. 481 billion rubles were invested in the industry, approximately 10-15% of this was invested in R&D.

The strategy outlines the need to regulate the admission of foreign companies to the Russian market. Involvement since the mid-2000s. foreign automakers, subject to the independent development of component suppliers, has led to the creation of an excess number of competing auto assembly plants in the country, the document states. This has reduced the attractiveness of the market for investment by component, subcomponent, and material manufacturers due to fragmentation and low issuance for most platforms.

According to the authors of the strategy, in 2021 the total production capacity in Russia amounted to 2.95 million vehicles. The loading rate for the assembly of passenger cars and light commercial vehicles (LCV) is 60%. This is generally in line with the market: according to the Association of European Businesses, sales of new passenger cars and LCVs in 2021 amounted to 1.67 million vehicles (+4.3%).

Forecasts for 2022 and 2023 in strategy they look extremely cautious. It is assumed that in 2022 only 800,000 vehicles of all types will be sold in Russia, 600,000 of them are cars, and 40% of total sales will come from imports. Gradually, the share of imports will decrease, while production will increase. The authors of the document expect that the market will be able to surpass the 2021 figures only in 2026-2027, when it is expected that it will be possible to reach sales of 1.75-1.76 million cars with the production of about 1.3-1.4 million cars in Russia.

In the future, the industry also expects a slow increase in production and consumption indicators: in 2035 it is expected to produce 2.1 million vehicles, 1.9 million of which will be sold on the domestic market.

Automakers have an understanding of the configuration of the future component industry and its priorities, a representative of the GAZ group told Vedomosti. According to him, back in 2020, the company worked out its own localization projects for critical groups of components, the key of which is a light diesel engine for commercial vehicles.

“We have worked out business plans, a list of projects has been submitted to the Ministry of Industry and Trade. GAZ is fully prepared to organize their production at its facilities,” said the representative of the concern. He believes that it is necessary to launch the sectoral component program as soon as possible and it is important that it is not only written into the strategy, but also that budgetary funds are provided for its support for the next three years.

“AvtoVAZ“plans to apply to the Ministry of Industry and Trade after the adoption of an updated strategy for the development of the automotive industry to make changes to its special investment contract (SPIC),” Maxim Sokolov, president of the company, told Vedomosti in July. According to him, the SPIC was concluded under the previous shareholder of AvtoVAZ [Renault] and in the current conditions partially ceased to be relevant. Sokolov also said that the strategy of AvtoVAZ would also be included in the overall strategy of the industry.

Vedomosti sent inquiries to other Russian national automakers.

According to SBS-Consulting project manager Dmitry Babansky, over the past 15 years, the domestic auto industry has been developing within the framework of a globalization model and integration into international supply chains, and now there will probably be a transition to the concept of technological sovereignty. “In this context, 2.7 trillion rubles, or about 200 billion rubles each. per year is an adequate amount, given the inclusion of investments in R&D and the creation of component industries,” the expert believes.

If the strategy is implemented, the state will be able to become a full-fledged participant in the automotive and component industries, says Sergei Burgazliev, an independent automotive industry consultant. According to him, this is very similar to the modern experience of China and is expedient in terms of technological security and increased localization.