Vladimir Putin has announced that his government will spend $19.6b (584 billion rubles) on auto-sector stimulus, with spending planned on technology development, employee re-training, direct subsidies, and cash-for-clunker-style consumer stimulus. Another $20b of investment is expected from foreign automakers. These measures are aimed at a host of of ills besetting the Russian auto industry and market, ranging from what the government describes as a 4-7 year technological deficit, and a 50 percent drop in sales last year.
Perhaps the biggest beneficiary of the stimulus is AvtoVAZ, which has been hanging on to survival through previous government assistance (Renault lost $370m due to its stake in VAZ, which some had suggested it should up to full ownership for the princely sum of $1). AvtoVAZ will receive 28b rubles, and the government will reserve another 10b rubles for the firm if it completes a reorganization. One of the conditions of VAZ’s reorganization is that it increase development spending, a condition the government hopes will improve the Russian industry’s average development spending of 1 percent of earnings.
In contrast to the huge sums being handed over to Russian auto firms, Russia’s new cash-for-clunkers consumer stimulus program is remarkably small, especially considering the dramatic declines in Russian vehicle sales. The government will offer $2,350 rebates towards the purchase of a Russian-built vehicle (with a ten year old trade-in), but has budgeted for a mere 200,000 rebates. And the relatively small size isn’t the only concern for analysts who argue that Russia’s car market is in for more tough times. Businessweek reports that a lack of transparency and fears of corruption lead many to believe that the stimulus will not do much to revive new-car demand in Russia.
But hey, at least it will bring the price of a Lada 2105 (pictured above) to a mere $3,330. Great success!
Well, La-dee-da….Comrade.
So it’s only Obama who rewards failure with stimulus money, thus punishing success. By many accounts, UAZ Patriot is an excellent jeep. Surprisingly well put together and reliable, for Russia anyway. And who’s getting the bailout? Why, those AvtoVAZ losers, of course.
Since Russia has reverted to a defacto dictatorship under Putin the only capitalist scenarios that are lucrative are those Putin wants to be. That’s why the Russian automobile industry and much of the economy are on the rocks. There is no reason Russia shouldn’t be prospering like China if it truly were a free market economy. Great job Comrade Putin. One step forward and fifteen back.
I think Russia want to prosper like Japan and South Korea and looks at how free their markets were during their boom years.
And not a moment too soon with the bailouts, Comrade Putin! The world should never be deprived of the jewel-like Lada 2015.
And Edward, you devil you, that photo shows the left front bumper rubber is cockeyed. I’m certain the roooskies build quality is better than that. Shame on you!
(I can’t wait ’til the Eurocrats get their FMVSS cum ENECE claws into THAT rig. That roof looks like it’d crush from a good snowfall.)
That Lada’s so homely I almost want one. Do they sell them in Alaska?
No, but you may be able to see one from there.
“In Russia, Auto industry stimulates you!”
Regardless of the wealth sloshing around in the upper 1%, they can come up with some incredibly interesting solutions to getting around in the barely paved countryside.
Especially neat solutions for deep snow…
I do wonder what kind of deal I could swing on a KAMAZ.
Ural and Ural only (with Kamaz diesel, of course).
Evolution of Lada 2105
http://www.palitsyn.com/__data/assets/image/0012/3180/bmw-vs-lada.jpg
You all should remember that Lada 2105 is based on the Fiat 124, which won the prestigious Car of the Year award!
In 1967.
Truth to be told, they’ve planned to shut down production of the boxy 1960s cars many times, but people won’t buy the horrible FWD replacements. Lada sales for example in Finland fell about 90% when the RWD models were discontinued in 1997 due to tightening safety and noise regs.