Assembly and Localization of Foreign Cars in Russia

In recent years year more and more companies have decided to establish new joint ventures and their own plants taking on growth and development in the promising Russian automotive market. Industrial assembly regime with tariff preference for automotive component import, has become the additional stimulus for foreign vehicle production establishment in our country. Moreover, it is meant to create incentives for foreign assembly plants to purchase components and materials from Russian suppliers as well as to attract foreign component manufacturer to Russia. 

Industrial assembly regime with tariff preference for automotive component import, has become the additional stimulus for foreign vehicle production establishment in our country. Moreover, it is meant to create incentives for foreign assembly plants to purchase components and materials from Russian suppliers as well as to attract foreign component manufacturer to Russia.

Meanwhile in February 2011 Ministry of Industrial Trade and Ministry of Economic development toughened rules of industrial assembly regime in Russia. The new rules do not cancel the active agreements but are provided for those automotive manufacturers, which intend to extend their production in Russia. According to the new rules of industrial assembly regime foreign automotive manufacturers will be able to import components with tariff preference for 8 years (but not longer than till the end of 2020) if in three years after the day of settlement their annual production volume comes up to 300,000 vehicles (if the new enterprise is established) and 350,000 vehicles (if existing facilities are modernized).

The localization level is increased up to 60% - which have to be achieved during five years, including the establishment of engine and transmission plants, whose products should be installed to at least 30% of assembled vehicles. At the same time, according to the new rules, SKD assembly is limited by 36 months after the additional agreement effective date. At that the share of SKD assembly should not exceed 5% of the total production.

Moreover, according to additional agreement foreign automotive manufacturers are liable to establish vehicle development centers in Russia. 

We should also mention that the value-added localization formula has been changed in the new rules of industrial assembly: all commercial expenses have been excluded.

The report is prepared with an office research method. The major information sources are our own databases and the information obtained from the market players directly. The structure of the report and calculation methods are developed by the specialist of AUTOSTAT analytic agency. However all of them are based on the worldwide market capacity calculation basis.