Russia Plans to Double Scrappage Fees on Imported Cars by 2025, Boosting Local Production
In a strategic move aimed at reshaping its car market post Ukraine invasion, Russia is set to increase taxes on imported cars by doubling scrappage fees starting in 2025. Draft budget documents published on Monday revealed this plan, which includes a significant rise in state support for domestically produced vehicles.
The impact of Moscow's actions in February 2022 has led to a shift in the automotive landscape, with Western carmakers exiting the market and Chinese manufacturers stepping in to fill the void. As a result, Russia anticipates a nearly twofold increase in revenues from car recycling by 2025, reaching 2.01 trillion roubles from the current 1.08 trillion roubles.
The proposed changes will see scrap-related costs for imported cars jump to 1.14 trillion roubles in 2025, up from 680 billion roubles, while costs for locally manufactured vehicles will rise to 871.5 billion roubles from around 400 billion roubles this year. Both domestic manufacturers and car importers will be required to pay these scrappage fees to cover future state expenses related to the recycling process.
However, to mitigate the impact of higher costs, the draft budget also includes increased subsidies for locally made cars. This move is intended to help offset production expenses and maintain competitiveness in the market. As a result, imported cars could become more expensive relative to locally produced vehicles, potentially prompting Chinese carmakers to consider shifting some production to Russia.
In 2022, Russia experienced a sharp decline in domestic car production, reaching a post-Soviet low, as Western automakers abruptly ceased operations and withdrew from the country. The upcoming changes in scrappage fees and state support are expected to further transform the automotive industry in Russia and influence the decisions of car manufacturers moving forward.
Analysis:
- Russia plans to double scrappage fees on imported cars by 2025, while increasing state support for locally made vehicles.
- This move aims to boost domestic car production and make imported cars relatively more expensive.
- The changes could prompt Chinese carmakers to consider moving production to Russia to remain competitive.
- Western carmakers have exited the Russian market, leading to a decline in domestic car production in 2022.
- The impact of these changes will reshape the automotive industry in Russia and potentially affect global car manufacturing trends.