Automobile Industry Position in Russia

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The Russian car industry experiences the most severe crisis of the last years. For the First Quarter of 2005, the sales of Russian automobiles have fallen by 14 % while imported car sales have increased by one and half times. The car factories think that they will have no other way out but to assemble foreign cars.

In 2004, the car industry showed incredible growth. Russian domestic car sales have grown by 10 %, and foreign-made car sales doubled. Experts believed that the explosive sales growth would continue, as the market had enough room for domestic cars and foreign-made cars.

Industry PositionHowever, the miracle did not happen. According to domestic car sales experts, the First Quarter showed domestic car sales plunged by 14 %. The sales of new imported foreign-made cars have increased almost two times, the sales of second-hand foreign-made cars increased by one and half times, the sales of “Russian foreign-made cars» increased by 17 %.

The discussion of Russia’s automobile market problems and the domestic car industry’s development became a hot topic. It is necessary to notice that the discussion went from governmental offices into the Russian cities’ streets.

At first sight, the main reason for a mass protest of motorists is making the right steering wheel cars illegal and increasing customs duties on second-hand foreign-made cars. However, the essence of the conflict is much deeper. The main issue is the crisis of the automobile industrial policies of our state Web Posting Reviews.

We can speak about a more or less complete industry development strategy only since mid-2002 when the government approved the Concept of Automobile Industry Development in Russia. This document has been adopted in private, and under heavy pressure of the Russian car, manufacturers are a bright sample of eclectic bridging of opposite problems. On the one hand, the proposed integration of the country into the global automobile market tried to preserve the archaic domestic car industry and even create greenhouse conditions for the latter. All these years, the authorities are trying to do pleasant things for the motorcar giants that have barely changed since the Soviet times and do useful things to grow peoples’ needs for reliable and safe automobiles promptly.

The power of lobbyist efforts of representatives of the Russian car industry is much stronger than foreign manufacturers’ lobby what forces us if not to trudge back, but to stay at the same point. Therefore, the reasonable decision to drop import duties for components and cars is adopted with a biennial delay. The request to transition by 2004 to manufacture automobiles that are EUROS – 2 EURO – 3 ecologically complaint has not yet been adopted. At the same time, we see the debate of the proposals to restrict market competitiveness so that the interests of «Zhigulis” and “Volgas” manufacturers are preserved.

Meanwhile, the demand for foreign automobiles grows steadily. In 2004 for the first time, the purchase of foreign-made cars had exceeded sales of Russian-made cars by sales volume. The “sitting on the two chairs” policy limit is practically reached. Now there is a problem of choice. Either to preserve the domestic car industry as it is now by shutting the country down for foreign-made imports, a significant increase (because of lack of real competition) of the Russian-made automobile prices, what is going to make road traumatism situation even more pronounced (taking into consideration deficient safety levels of our cars) and, in the end, the sharp growth of social tension. On the other hand, it is necessary to acknowledge that we are unable to catch up with the advanced automobile powerhouses of the East and the West, and, hence, we should borrow their technologies by organizing the production of foreign cars in Russia, giving, thus, the option for each Russian citizen to purchase the car he wants, regardless of where it has been manufactured.

If one considers the first variant politically probable, he practically takes Russia on the road shoulder of the world economic process, hurts the interests of the middle class, and, what is most important, does not rescue the domestic car industry but only prolongs its agony. The other choice, certainly, is not quite without pain. However, here in Russia, a small sacrifice helps to win the game. A large-scale foreign investment into the motor industry responds to consumers, workers, and the state’s interests. It is only unprofitable to the autooligarches that have got used to parasite from their monopoly position and take advantage of imperious protectionist policy.