Russia changing vehicle utilisation scheme to stimulate domestic car industry

The Russian Government is reportedly altering the rules of its utilisation scheme, through which it allocates state aid for the reimbursement of fees paid by carmakers. These fees are intended to cover eventual vehicle recycling charges as well.

The utilisation programme was introduced in 2014 and that would offer incentives for the exchange of older models, in a bid to increase demand for new cars and stimulate Russia’s car industry. Customers would receive a discount on the purchase of new vehicles if they submitted their old car through the scheme.

For the past six years, carmakers have had to pay the utilisation fee for cars built in Russia as well as those assembled from imported semi-knockdown (SKD) kits. Now, the government in Russia has doubled the fee. Carmakers need to pay $2,500 per vehicle with an engine volume between one and two litres, which will make projected revenue from the scheme through 2020 worth 300 billion roubles ($4.9 billion).

Furthermore, from 2021, the share of guaranteed reimbursement is set to be lowered again to 25 per cent and 0 per cent from 2022.

At the same time, Industry and Trade Ministry has introduced a new system that carmakers will only be reimbursed for half of the recycling fee. Also, points will be awarded to carmakers for localising the supply of certain components. Localised engines or transmissions used in vehicle assembly, for instance, will be worth 40 points. OEMs running a research and development business in Russia will score an additional 20 points; and a further 20 points to be granted to those using localised aluminium or electronic systems in their vehicles.