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Together It’s Not Scary: How Manufacturers Will Share State Support

2024

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Video: Together It’s Not Scary: How Manufacturers Will Share State Support

Video: Together It’s Not Scary: How Manufacturers Will Share State Support
Video: Why the Global Chip Shortage Is Hard to Overcome | WSJ 2024, March
Together It’s Not Scary: How Manufacturers Will Share State Support
Together It’s Not Scary: How Manufacturers Will Share State Support
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Forgetting about rivalry and teaming up is the recipe for getting benefits from the Ministry of Industry and Trade to all major automakers who have acquired their own production sites in Russia. The ministry is hinting that the current car market is not enough for everyone and three or four leaders would be enough.

No money left

Automakers are standing on their ears. Indeed, in 2018–2019, the key document for the industry will expire - industrial assembly regulation No. 166, according to which only brands that have fulfilled all their obligations to localize production can rely on state support and reduced import duties. And the factories are asking to extend the grace period - hard times. However, the Ministry of Industry and Trade does not want to meet investors.

Александр Морозов, заместитель министра Минпромторга
Александр Морозов, заместитель министра Минпромторга

Alexander Morozov, Deputy Minister of Industry and Trade Alexander Morozov, Deputy Minister of Industry and Trade

There isn’t enough money for everyone - this was clearly made clear by the Deputy Minister of Industry and Trade, Alexander Morozov. The relevant ministry is ready to work with each of the auto brands individually and agree on preferences depending on the level of localization of products and the volume of future investments. One option for cooperation is the signing of a so-called special investment contract (SPIC) with the government or local authorities. In this case, the car brand in exchange for state support in the form, for example, of tax benefits or subsidies, undertakes to invest a certain amount in the development of production in Russia. You will have to invest a lot, but those who agree will receive a clear advantage - the "old" investments will no longer be taken into account.

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So far, only Mazda has gone to the deal, which invests two billion rubles in the localization of engines and new models in Vladivostok. There are several other interested companies - in particular, Avtotor, Hyundai and Daimler. The latter conclusion of an investment contract is interesting by the possibility of access to state contracts - after all, Mercedes-Benz cannot participate in state tenders until it acquires localized production. It is important for the Germans to obtain permanent supplier status for government agencies and ensure a guaranteed sales volume of cars in the unpredictable Russian market.

As Alexander Morozov explained to us, some automakers managed to sign an industrial assembly agreement in the first edition from 2005 to 2011. In the appendix to the agreement, the companies indicated the list of spare parts imported to Russia and committed themselves to gradually delete auto components from the import list, switching to localized analogues. In exchange, the government guaranteed partners reduced customs duties on imports. So, for example, those who entered into such an agreement in 2007 had to delete from the list of imports the maximum number of imported auto components by 2019. At a time when the country needed real investments and by any means lured car companies to open its own sites, this simple scheme fully paid off: how plants grew on leaps and suppliers were built.

Мы предлагаем автопроизводителям совместными усилиями выпускать в России моторы и коробки передач
Мы предлагаем автопроизводителям совместными усилиями выпускать в России моторы и коробки передач

We offer car manufacturers to jointly produce motors and gearboxes in Russia. We offer car manufacturers to jointly produce motors and gearboxes in Russia.

“A few years later we proposed a second edition of the resolution,” Morozov says. - It no longer had a “preferential” list for reduction. Instead, requirements were set to achieve a certain level of localization. The corresponding percentage was calculated by the formula in which the price of imported automotive components in rubles was related to the ruble value of the car produced in Russia. And from their 30–40%, each automaker, depending on the agreement, had to bring this figure to 60–70%. Not everyone accepted such a scheme; a considerable part remained to work by decision in the first edition.

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The fact is that some, as they are called by the Ministry of Industry and Trade, “cunning gentlemen” cheated and included in this list everything that was possible, and gradually delete what is superfluous, and the main and most expensive components are still imported from abroad. Morozov also spoke about another way of making cars “more Russian”. For example, an office was created in Russia, it imported the necessary components, and then sold them to the automaker for rubles. Thus, auto brands "proved" that the purchased products are of local origin. In the Ministry of Industry and Trade, they found a council on the “quirky”, having come up with new work options in addition to the already mentioned investment contracts.

- Decision No. 719 was adopted, according to which, in order for cars to be considered localized in Russia, stamping of body panels, welding of the body, painting and a number of other operations should be carried out at local enterprises. And we want the most important units, such as engines and automatic transmissions, to also be produced in Russia. It is clear that achieving profitability is possible only with large volumes of output. Therefore, we proposed that car companies join forces and investments and establish joint production of components and assemblies.

According to the Ministry of Industry and Trade, such a business idea was proposed, in particular, to the Renault-Nissan alliance, as well as to Volkswagen and Hyundai brands. Competitors took this idea with hostility, but subsequently still held several working meetings.

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- They began to prove that working together would not work, because their gearboxes are completely different. But the operations in their production are the same! Iron, mechanics, parts - in general, all this is similar. So why not work together?

Now, according to Morozov, car companies continue to discuss the unexpected proposal of the Ministry of Industry and Trade. But regardless of their decision, there can be no question of any extension of the decision on industrial assembly, since this would deprive the car company of any incentive to increase the level of localization.

The Ministry of Industry and Trade also has an interesting opinion about the number of players in the market. Currently, 25 auto companies have signed industrial assembly agreements, and if all applications had been accepted at one time, there would be about 30 companies. But with the current volume of demand (about a million locally assembled cars), according to Morozov, there are enough only three or four automakers - each could sell 200-300 thousand cars annually. Of course, this is an approximate alignment, because in 2016 about 1.4 million new cars will be sold in Russia, and next year they will predict easy growth. However, the hint of the relevant ministry is clear: only the largest brands that can invest in the localization and development of local suppliers will help.

Яркий пример локализации компонентов - открытый в октябре в Тольятти завод чешской фирмы Brisk Tábor по выпуску свечей зажигания. Завод готов полностью обеспечить потребности АВТОВАЗа, заключил договоры с другими производителями. Объем выпуска составит 4, 5-5 млн свечей в год
Яркий пример локализации компонентов - открытый в октябре в Тольятти завод чешской фирмы Brisk Tábor по выпуску свечей зажигания. Завод готов полностью обеспечить потребности АВТОВАЗа, заключил договоры с другими производителями. Объем выпуска составит 4, 5-5 млн свечей в год

A striking example of the localization of components is the opening of a spark plug plant by Czech company Brisk Tábor in Togliatti in October. The plant is ready to fully meet the needs of AvtoVAZ, concluded agreements with other manufacturers. The volume of output will be 4.5–5 million candles per year. A striking example of the localization of components is the opening of a spark plug plant by Czech company Brisk Tábor in Togliatti in October. The plant is ready to fully meet the needs of AvtoVAZ, concluded agreements with other manufacturers. The volume of output will be 4.5–5 million candles per year.

Ours is more expensive

Now the proposals of the Ministry of Industry and Trade have reacted positively only at AvtoVAZ. According to its president, Nicolas Mora, using the forces of the Renault-Nissan-AvtoVAZ alliance, which now includes Mitsubishi, it will not be difficult to fulfill the covenant of the Ministry of Industry and Trade.

Nevertheless, earlier several players spoke out against innovations and for the extension of the industrial assembly regime. Among them Nissan - this was stated by the vice president of the company for sales in Europe Philip Sayyar. He complained that it was necessary to import automotive components because Russian suppliers had greatly increased prices and it became more profitable to deal with foreign partners. Moreover, the quality of Russian products, according to Sayyar, is very low. Representatives of the Ford company also expressed the idea of extending the decree No. 166 to the Za Rule correspondent. Those who wish to remain anonymous sources in large auto companies claim that without extending the effect of this decree, car prices will certainly rise, and the lineups, already scarce, will decrease even more. After all, parts will have to be imported at Euro prices, and ready-made cars will be sold for rubles.

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