An old-fashioned foreign car of Russian production to become the national car
The Russian automobile industry obviously cannot be helped. The Russian people will have to reconcile themselves to the fact that soon there will be no LADAs, NIVAs and Volga cars on the roads. The next generation of Russians will drive models of foreign cars that are phased out abroad and produced here in this country. This is seen from the efforts foreign car producers make to settle down in Russia, and also from their recently announced proposals.
The matter of the fact is that General Motors and Ford joined the demand of Russia’s auto lobby on raising of import duties on foreign cars that are older than three years. At an international forum “Investments in Russia’s car industry” in Moscow, representatives of these car makers stated that any day Russia might become the most perspective market for automobile production. As it turned out, Russia is not the only perspective country for car making. In any case, Russia is still among countries that are the most attractive ones for transnational automobile companies; forecasts say, 60% of the global auto production growth will be concentrated in Russia within the nearest 7 years. Other countries attractive for automobile production are China, Brazil, South Korea, India, Mexico, Poland and Thailand.
Foreign car makers think that one small detail is necessary for foreign autos of Russian production to flood the streets. They say Russia’s authorities must regulate the system of crediting for purchase of cars in Russia and cut short importation of foreign cars by Russians. In fact, this is what the domestic car industry fatigued with competition demands as well. Foreign producers face the future optimistically, they just ask for equal conditions on the Russian market. And Russia’s car producers are reducing production of cars.
Certainly, Russian VAZ automobiles cannot be compared to Chevrolet-Niva produced at AutoVAZ together with General Motors. But VAZ cars are constantly rising in price. It is perfectly clear that consumers will prefer foreign cars produced in Russia to VAZ autos if they have an opportunity to buy cars on credit. What do the national car producers expect in this situation? Chairman of the AutoVAZ board of directors Vladimir Kadannikov announced that an agreement was achieved on production of Opel Astra cars in Russia; what is more, he hopes for production of these foreign models in Russia.
Unlike AutoVAZ, officials at Severstal-Avto say they are negotiating with three large-scale foreign car makers. What is more, production of some foreign car model taken out of production abroad is soon to be launched at the Ural car factory. In fact, this resembles the last convulsions in the protracted agony of the domestic car industry. In other words, this is an inglorious conclusion of the hopeless opposition to transnational corporations.
Representatives of the Russian Ministry of Industrial Science, that is in charge of the domestic automobile production, summed up pessimistic results of the domestic car industry development in 2002. Director of the machinery construction department in the Ministry of Industrial Science, Nikolay Sorokin said that engineering performance standard of cars produced in Russia is determined by the population’s paying capacity level. On average, Russians buy cars at the cost of 2.5-6 thousand dollars; the share of such sales makes up 75%. These are foreign cars mostly, those old foreign cars against which Russian and foreign car producers protest.
According to the Ministry’s information, 489 thousand of old foreign cars were imported in Russia in 2001, the figure increased up to 554 thousand in 2002. The Ministry estimated budgetary losses because of different conditions for import of old foreign cars for companies and individuals to the sum of 1.4 billion dollars. In other words, Russians saved the sum when they purchased old foreign cars from people driving these cars from abroad. But as the saying goes, what is good for people is at the same time bad for the state. Russian authorities don’t want people to save on the government. They want to seize all money that people save. This is also what top officials of the Russian automobile industry and their colleagues from Ford and General Motors are striving at: they want to take money away from people by all possible means.
Representative of the ministry, Nikolay Sorokin shares opinion of the AutoVAZ and Ruspromavto management and thinks that domestic production of cars reduced because of a large-scale importation of old foreign cars in the country.
It seems to be very strange, but officials say that as soon as people got a choice whether to buy domestic cars or foreign ones, this immediately brought the domestic car industry down. What do they do in this situation (we mean officials)? They deprived people of this choice. People now will have only one way-out: either to buy cheap but bad domestically produced cars, or expensive foreign cars produced in Russia (and quality of these cars is highly likely to be lower than all over in the world). Even despite the fact that such cars will be sold on credit, they all the same will be rather expensive for majority of the population.
These are hardly the words Russians want to hear in the year when parliamentary elections are to take place. However, it may still happen that someone will promise brand new Mercedes cars for 1.000 dollars to people.
Kira Poznakhirko PRAVDA.Ru
Translated by Maria Gousseva
Read the original in Russian: http://economics.pravda.ru/economics/2003/7/21/63/8546_autoprom.html
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