Russia is looking to extend the subsidies it provides for the movement of finished vehicle volumes within the country to the ocean transport sector, in addition to rail, as carmakers continue to struggle with the downturn in the domestic market.
Following an agreement established in 2010, the government subsidises vehicle shipping services run by state-owned Russian Railways between Vladivostok in the Far East of the country and western regions, including Moscow.
“Such an approach will allow carmakers to choose the most cost-effective way to move supplies of cars and increase the competition between logistics providers, which in turn may lead to the changing of the tariffs,” confirmed Alexander Morozov, head of the transport department at the Ministry of Industry and Trade.
A spokesperson for Russian carmaker Sollers, which is due to receive the largest part of the proposed subsidies, said the plan to expand the modes that can be subsidised to include ocean from the Russian Far East is linked to the fact that the cost of sea freight from Vladivostok to St Petersburg was on average 25-30% lower than the cost of rail transport last year.
Sollers set up a plant in Vladivostok that began production at the end of December 2009.
In addition, according to the general director of the analytical agency Infranews, Alexey Bezborodov, there are no Russian shipping companies moving vehicles by sea in the country today.
“The main players in this market are the Japanese and Norwegian companies,” said Bezborodov. “However, it is more difficult and longer compared with the railroad transport, up to 1.5 months versus 1.5 weeks for the supply from Vladivostok to Moscow, for example. In addition, rail transportation is more convenient for distribution because of supplies of cars in the cities along the railroad.”
According to Denis Manturov, Russia is not going to increase the size of the federal subsidies on car transport, which for 2015 total RUB 3.2 billion ($56m). However the government could demand that regional budgets allocate subsidies, including for the movement of vehicle volumes on the internal market.
The acting governor of the Leningrad Oblast, Alexander Drozdenko, confirmed that the authorities plan to allocate subsidies covering transport costs for vehicles produced locally for distribution to other regions.
"This is an absolutely normal activity for the authorities to support the industry, which is one of the drivers of the country’s economy,” said Drozdenko. “For every one ruble invested in the production of a car, it gives at least 3-4 rubles to the whole economy."
The main beneficiary of this support in Leningrad Oblast is Ford. At the same time, according to Drozdenko, the full extent of the subsidies has not been fixed as negotiations with carmakers continue.