The analytic agency "AUTOSTAT" carried out a study of the parc of cars in Russia as of January 1, 2017 and it determined the largest regional parks.
Car producers will be able to pay a scrappage duty in Russia already from August of this year. But only importers of foreign cars will have to pay “cash” and car producers that work in Russia will be able to present guarantees for the recycling. By intention of authorities, the new protection measure will become the worthy substitution for high dues, which would be decreased after the accession of Russia in WTO. But we should not wait for the significant rejuvenation of Russian car parc – only cars that are launched in the circulation at first would be imposed by scrappage duty…
Russian government with the help of “Green piece” took up the idea of the scrappage duty introduction for car producers. By the words of officials, it will permit to create the infrastructure of cars recycling and to improve the ecologic situation in Russian cities. However, scrappage duty, in fact, is the camouflaged measure of protection of car producers that work in Russia after the duties for imported foreign cars decreasing in accordance with WTO conditions. It is remarkable that it was offered to introduce the scrappage duty from August 1st – at once after the accession of Russia in World Trade Organization. The analogous duty will appear in countries of Customs Union and it would be introduced later in Kazakhstan and Byelorussia.
Scrappage duty should protect Russian car market from active import of foreign used cars and to keep the competitiveness of domestic cars and foreign cars that were produced in Russia, the analyst of “Investcafe” supposes. “There are produced mainly cars that are oriented on average and low-cost segments in our country and they will occupy the winning position in compare with the analogous used vehicles”, - explained the expert. On opinion of specialist of marketing of auto web site Quto.Ru, Aleksandr Micheev, scrappage duty will give the same effect of Russian car producers’ protection that was before owing to the import dues increasing for foreign cars. “The scrappage duty is the necessary measure for car producers, who opened productions in the territory of Customs Union, otherwise, the creation of production capacities in Russia would loose the economic sense”, - said the expert. “I’m sure that such scenario (accession in WTO) was discussed separately between the government and car producers on the stage of negotiations about the production creation in Russia and companies received guarantees that their margin won’t decrease. So, the balance of power in the Russian market won’t be changed significantly after the dues decreasing in accordance with conditions of WTO accession”.
And the leading expert of UK “Finam Management”, Dmitry Baranov, supposes that “it is not about the protection of car industry” as the scrappage duty will be introduced for all vehicles without exclusions that are launched in the circulation at first in the Russian territory and there won’t be a discrimination by production place or nationality of car brand. In addition, the number of imported used cars in the country decreased sharply during the recent years due to other measures. “The scrappage duty was introduced everywhere not with aim of “protection of domestic producer” but with aim of deliverance from different junk, improvement of ecology and protection of environment. And it could be introduced in our country with the same aim”, - supposes the expert. By the way, the system of vehicle scrappage was introduced in such countries as Netherlands, Japan, Canada and South Korea. As participants of branch said, finally Russia started to think about the problem of road safety and ecology.
How much is the recycling?
Scrappage duty reflects the labour intensiveness of recycling of different types of vehicles, accumulates the compensation for ecology threat and includes money resources for the next recycling, informed Ministry of industry and trade. This duty will be calculated by simple scheme: the basic rate should be multiply on a coefficient that is connected with characteristics of a car to get the final sum. Basic rates will be unique for the whole country and a coefficient will depend on an engine volume and age of vehicle.
Meanwhile, Ministry of industry and trade has already defined the rates of scrappage duty: from 0 Roubles for a Russian car to 600 thousand Roubles for an imported foreign car. According to the law draft that was prepared by Ministry (these amendments in the law “About wastes of production and consumption” were available for “Finmarket” agency), the basic rate for passenger cars could be 20 thousand Roubles. The least duty will be for a car with the engine volume less than 1300 cm3, which is produced in Russia – 10 thousand Roubles – it was presumed for them the doubled reduced coefficient. The maximum sum of duty for new foreign cars will be up to 600 thousand Roubles for a car with the engine more than 3500 cm3. The basic rate for commercial, cargo and passenger vehicles will be 40 thousand Roubles, for buses – 300 thousand Roubles. In dependence on length of bus, “coefficients of labour-intensiveness” vary for new vehicles from 150 thousand Roubles (the length is 5 metres) to 750 thousand Roubles (the length is 12-18 metres), for used vehicles – from 240 thousand Roubles to 1 million 410 thousand Roubles, respectively.
Meanwhile, car producers that work in the Russian territory would not pay scrappage duty if they would present guarantees for the independent recycling of produced by them cars. And foreign concerns, which import vehicles in Russia, will have to pay a mandatory fee. On opinion of experts, it could influence seriously on prices of imported foreign cars, therewith, as on prices of used cars, so on prices of new ones.
However, foreign car producers, maybe, won’t shift scrappage dues to customers, Dmitry Baranov from UK “Finam Management” supposes. “By taking into account the possibilities of foreign concerns, they will be able to take the part of these expenses to increase their competitiveness and to increase the market share”, - said the expert.
Junk cars for a sale
The business of junk cars recycling has a huge potential with account of perspectives of Russian car market growth. But this production sphere is in its infancy yet, noted Kirill Markin from “Investcafe”. “Enterprises that recycle vehicles could be “counted on the fingers” and they take payments from car owners for their services and it doesn’t promote their loyalty”, - remarked the expert. And the experience of foreign countries shows that the recycling of cars is a very profitable enterprise. About 70% of vehicle construction could be used for the recycling and it is one of the main sources of raw materials for industry in developed countries. “At first, a car consists of different materials, which could be in a high demand among different clients”, - said Dmitry Baranov from UK “Finam Management”. – For example, tyres would become a crumb rubber, which could be used as by road constructors, so by chemicals. Metallic parts could be accepted by metallurgists, glass will be also recycled and etc. So, there are customers for almost the whole car, all parts of it. Secondly, there are only few of unsalable wastes from a car and it means that it could be earned the good sum for it. And thirdly, all technologies of recycling are known, the equipment exists, expenses are not high and it makes the recycling very attractive business”.
On opinion of Kirill Markin, if funds that would be received in a budget for the scrappage duty would be used for the special enterprises creation then it would permit to solve the problem of old cars recycling in the raw materials. However, the successful formation of this branch, first of all, will depend on stimulating measures, which the government should offer. Therewith, “motivation of top” is necessary as for private entrepreneurs, so for car producers. Schemes of collaboration could be different but they should be definitely. Otherwise, we will receive a scrappage duty that will work only on paper”, - warned the analyst of “Investcafe”.
Domestic car producers that won’t pay scrappage dues instead of guarantees could create their own scrappage enterprises. By the words of Kirill Markin, car producers could become earlier explorers in the recycling of old cars by motivating junk car owners to recycle their cars for benefits for a purchase of new cars. For example, KAMAZ already considers the possibility of its own scrappage production creation on base of plant “Remdiesel”, informed the press office of KAMAZ. But experts doubt that domestic car producers that were burdened by non-core assets since Soviet-era and try to get rid of them at the present time would start the recycling business. “Whether car producers would create their own recycling enterprises, or they will be intermediaries, it will depend on conditions that would be formed by the government”, - said Kirill Markin. – It is clear that the program, which would stimulate concerns to go this way, should be developed for a quick start and this program should be profitable not only in the first stage due to the state support but also in future”.
The every second car should be scrapped
According to offers of Ministry of industry and trade, cars that are launched at first in the circulation would be obliged by scrappage dues. Meanwhile, more than 50% of Russian parc are cars that are older than 10 years, among them 22,7% of cars are older than 20 years in accordance with the data of AUTOSTAT agency. So, the every second car in Russia should be scrapped. The age of Lada car parc is more – 57,8% of cars celebrated their 10th anniversary and 25,8% of Lada cars are older than 20 years.
By the words of participants of branch, due to the scrappage duty introduction, Russian car market will be upgraded mainly owing to new cars and it won’t grow because of imported foreign cars in the Russian territory. However, responsibility for a scrap of cars that are exploited in our country will still belong to their owners. “The defining factors of the end of life cycle must be the technical inspection. But its procedure was also quite liberalized recently and we could not hope that scrappage duty will renovate seriously car parc of country while there are no clear order of actions in case of the end of life cycle of the concrete car”, - Dmitry Baranov from UK “Finam Management” supposes. – “It will be quite enough if this duty would help us to get rid from many unauthorized dumps, from “cemeteries” of abandoned cars and from other “charms” of civilization”.