2024-07-17 22:00:00
Artem Krasnov
“Car” field editing
Russian factories increase localization efforts, but imported cars are still cheaper
Alexander Podshchekoldin, Chairman of the Russian Automobile Dealers Association (ROAD) is called Lower recycling fees in Russia, rather than the planned increase: in his opinion, this would increase the range of the car and lower the price. AVTOVAZ, meanwhile, is lobbying for an increase in recycling fees, a measure the government has backed. In addition, we are talking regarding a sharp increase in this payment: from 300,000 to 550,000 rubles in 2024, and subsequently to 1.17 million rubles (for cars with a 1-2-liter engine). Automotive journalist 74.RU Artem Krasnov believes that the proposals of the head of ROAD deserve attention, which include limiting the pricing policy of AVTOVAZ itself. He talks regarding the reasons for recycling fees and the futility of overestimating recycling fees.
He’s not trash to you
The eponymous collection has as much to do with car recycling as some kind of development ministry has to do with development. Funds collected go into the general budget as an alternative to tariffs. In 2012, under pressure from the WTO, Russia lowered tariffs but made up for the lost revenue with a fee, which was somehow called a recovery fee (it might have been called an educational fee, a rectal fee, or an esoteric fee , its essence is the same).
For the first few years, recycling fees are fixed, which suits everyone. Local manufacturers (including foreign carmakers) receive compensation in the form of budget “cash rebates”, so the tax only applies to purebred foreign cars, which on the eve of 2022 become the rarest unicorns: for example, Hungarian-assembled Suzuki Vitara or Turkish Toyota Corolla.
But everything changed following the SVO started, Russian car assembly plants stopped working, and Chinese cars were sucked into the resulting vacuum with such force that the windows of Togliatti shook. At the end of 2024, imported models accounted for 54% of sales, but in fact it was more, because can a “Chinese” product with suspension and bumpers installed in Russia be considered locally assembled?
Why are they raising recycling fees?
ATVOVAZ without competitors seems to be able to breathe freely. Even with the old (i.e. low) scrap collection system, the Chinese will not be able to bring to Russia a car with the same price as the Lada Granta, so a deeply modernized G8 becomes important once more, just Like the evening newscast. But the return of a Lada Vesta packed with Chinese parts has intensified competition with the cheapest Chinese cars, making it difficult to sell for studio apartment prices. Then the head of AVTOVAZ, Maxim Sokolov, asked the government to increase the recycling fee from 178,000 rubles to 300,000 rubles in order to drive away annoying Eastern partners with this smoke poison. The government agreed and raised interest rates in August 2023, triggering a sharp rise in prices. Even the seemingly Russian Muscovites were spooked, putting over 200,000 on the price tag. On top of that, the price of Vesta itself also started to rise: in the autumn, its price was adjusted several times, and for some reason it was always on the rise.
The price of Lada Vesta SW Cross reaches 2.113 million rubles, and this is not the most expensive modification of the car. Chinese crossover cars, with regarding 60-70% tariff added to the price, are quite cost-effective
At the beginning of this year, the unthinkable happened: for the first time in years, foreign cars began to cut prices, and the management of ATVOVAZ risked no bonuses (just kidding, who would let them have no bonuses). The same Moscow company that assembles China’s JAC Motors immediately cut its price by 500,000 rubles, so its crossover now costs as much as a Lada Vesta. Several truly “naturalized” Chinese cars were immediately registered in its price segment, and although this seemed like good news for the entire country – there was competition following all – AVTOVAZ once once more started its lobbying machine.
In a new appeal to the government Factory management exposed ChineseClimbing blatantly into Togliatti’s interest zone, it’s as if we’re not talking regarding the market economy, but the courtyard showdown in “The Words of a Boy.” But it seems that the government has fulfilled this promise. It is expected that the recycling fee will increase from 300 yuan to 550,000 yuan this year, and will increase to 1+ million yuan in subsequent years.
Do recycling fees have a significant impact on price?
Let’s take the Jetta VA3, a close relative of the Volkswagen Polo sedan, as an example: it recently started official sales in Russia. The version with automatic transmission and good equipment costs 2022 thousand rubles, which is 156 thousand rubles more expensive than the closely equipped Lada Vesta 1.8 CVT in Techno configuration.
Now for a little customs arithmetic. In China, the price of Jetta VA3 is regarding 70,000 yuan, or regarding 840,000 rubles, which is roughly the same as the pre-crisis Volkswagen Polo. When imported by a legal entity, the total customs duty for such cars is 630,000 rubles, of which almost half (that is, 300,600) is just recycling fees. The second largest expenditure item is value-added tax (194,000). The tariff is 126,000, the consumption tax is 6,400, and the customs clearance is 3,100.
Judging from the current price of around 2 million rubles, even compared with Lada Vista, the Jetta does not seem to be the most obvious choice, mainly because it is designed to cater to Chinese tastes and is not suitable for Russia. But everything will change if recycling fees and other fees are eliminated: for regarding 1 million rubles, this will become a bestseller
Without recycling charges, the Jetta VA3 would be significantly cheaper than the Lada Vesta, and if all tariffs were removed, it would challenge the severely inflated prices of the Lada Granta, which starts from 911,000 for even the base version with airbags and 992,000 with air conditioning.
Vice versa: if the recycling fee is further increased to 550,000, the price of the Jetta VA3 will increase by another 250,000, which gives AVTOVAZ the opportunity to increase the cost of the Vesta by another 200,000. Price, apparently pending approval of new disposal fee.
Does Utilsbor develop local production?
This was true to a certain extent, or rather until the collapse of the Russian car assembly industry following the departure of all the major players: Volkswagen, Hyundai, Renault, Toyota… Current customs barriers helped AVTOVAZ, As for other companies producing… yes, they exist, but something strange happens: their level of localization is extremely low, and the price of a Russian-assembled car is almost indistinguishable from that of a direct import, even if recycling fees increase. I recently tested the Kaiyi X7 Kunlun, which is a close relative of the Chery Tiggo 8 Pro Max but is assembled in Kaliningrad. Since the Tiggo 8 is a very popular car, I think the Kaiyi’s only chance of becoming famous is to sell the car at a much cheaper price. But in fact, the basic Kaiyi X7 Kunlun sells for 3 million, and the Tiggo 8 Pro Max – 3.2 million, and the configuration is slightly better. If we increase the awareness of the Chery brand (which will also increase the price), we can say price parity.
Kaiyi X7 Kunlun is not cheaper than its imported counterparts
Of course, there are exceptions, such as Moskvich: but let me remind you that initially it was not cheaper than imported competitors, and prices were reduced when facing huge sales problems: at the beginning of the year, unsold stock exceeded the stock. Forehead. This dumping is not a wonderful life, and, by the way, it doesn’t do Moscovici very much.
So why do we need local councils? What is its sacred meaning? With so little localization, it’s difficult to even talk regarding added value, taxes and job opportunities in Russia – all of them are there, but only in homeopathic doses. The Nissan plant, which produces a next-generation clone of the Chery Tiggo 7 Pro under the Xcite brand, is currently operating at a fraction of its capacity. Yes, we can talk regarding some kind of jobs in the future, but here another problem arises: the automotive assembly industry requires a strong participation of foreign partners, but we do not see this. For two years, no major Chinese company has brought its car production facilities to Russia; only Haval continues to work at the factory that opened in 2019. Otherwise, all projects for assembling foreign cars in Russia are now initiated by Russia, which is very risky for China. That is why Chery distances itself from assembling cars at the former Volkswagen plant in St. Petersburg (Xcite) and possibly Kaluga. We understand that the Chery Tiggo 7 Pro was or continues to be assembled there, but Chery has not confirmed (but also not denied) this.
The scrap recycling fee did not act as an incentive for local assembly but was a way to raise the price above the waterline so that even following paying all the fees, one still managed to sell at a lower price than AVTOVAZ and other local assemblers importers will suffocate. In reality, our auto industry, rather than becoming more efficient, has simply raised prices to a level where its inefficiencies are less obvious. Lada cars are cheaper in Belarus than in Togliatti.
Does Russia need its own auto industry?
There has been an axiom since the 1990s: Russia needs its own automobile industry. I have shared this for a long time and the development of this automotive industry is natural and global brands are actively investing in our country. This is not the case now. It’s weird to have your own car industry as a super idea, especially if this car industry looks like underground workshop work and they want to sell Changan cars under the guise of Volga. Your car industry must have one goal: to produce cars that are cheaper, more modern, or better than other cars. The Russian parliament now offers neither, and the demand for ever-increasing recycling fees only emphasizes the growing gap. By the way, the idea that sooner or later we would be completely car-free without our own car industry is untenable because the car industry has long since become a global phenomenon and local councils have failed to do so. problem (they still rely on supplies from around the world).
Therefore, although ROAD’s statement sounds more like populism and is unlikely to be implemented, I still tend to agree. If we really want to be friends with the Chinese, then we shouldn’t let this friendship cost so much.
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