The Russian government has said it will spend Rub20 billion ($240m) to support vehicle purchases across the country this year. The bailout package is focused on providing soft loans by state-owned banks for Russian citizens willing to purchase new vehicles by the end of 2020.
The government estimated the measure would allow carmakers to sell an additional 220,000 vehicles and prevent or soften the anticipated slump in sales because of the Covid-19 pandemic.
There is still no official forecast on how vehicle sales in Russia will be affected in 2020. At the beginning of the year industry analyst IHS Markit was predicting them to climb to 1.8m and 1.9m in 2021. According to Boston Consulting Group, the impact of the coronavirus is likely to drop that by 20% to 1.4m under a best-case scenario. Under a worst-case scenario that could drop by as much as 50% to 900,000 units.
The Russian government has also recognised 12 carmakers as companies with systemic importance for the national economy. All companies with this status are eligible for additional state aid, government officials promised, not disclosing any further details. The government is reportedly discussing some tax breaks for the carmakers, components suppliers and automotive dealers, but no final decision on those measures have been made yet.
No supply disruptions
Over the last couple of months Russian assembly plants have had to shut down operations because of parts supply shortages. However, according to Igor Morgaretto, analyst of the Russian consulting agency Avtostat, there are now plans to gradually resume operations thanks to renewed supply from China and Europe.
By example, Morgaretto pointed to Volkswagen, which had to temporary shut down its Kaluga plant because of a shortage of automotive components for the VW Polo and Skoda Rapid, but was able to recently restart production.
Despite that, all automotive plants in Russia are likely to cut output this year because consumers are refraining from making big purchases during the economic uncertainty.
Russian carmaker Avtotor is likely to cut production by 40% in 2020, said head of the company, Vladimir Sherbakov. Nissan also said it was going to dismiss 450 employees at its St Petersburg plant. According a spokesperson for the carmaker, the plant is shifting from a two-shift operation to one-shift because of the weak demand on the domestic market.
Avtovaz is likely to move to a four-day week for the same reason, according to its spokesperson. The company has been heavily hit by the current crisis. During April it only sold 9,400 finished vehicles, down 70% on the same month last year.