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Russia
Market Summary
With a population of 147.2 million, Russia has the potential to be a large vehicle
market. Total passenger vehicle ownership in Russia, about 110 per 1,000 people has
almost doubled from the 1993 level of 59 per 1,000 people. This level is still low
compared to most Western European countries (which average almost 400 per 1,000
people) or the United States which has 484 passenger vehicles per 1,000 people.
The Russian market experienced a significant decline after the break up of the Soviet
Union in 1991. Production levels fell by 9 percent in 1991, 14 percent in 1992, 11
percent in 1993 and 32 percent in 1994. After this time period, the market experienced
a turnaround, with an increase in production of 13.5 percent in 1997. Still, the 1997
production level of 1.17 million vehicles was only 56 percent of the level reached in
1990.
Sales of passenger vehicles in Russia increased from 814,000 vehicles in 1995 to 1.3
million vehicles in 1997. Total motor vehicle sales (including used vehicles) in 1997
were 1.6 million units. Prospects for increases in sales and production growth hinge on
stability in Russia's economic and political situation.
The Russian market is composed of two principal groups: the manufacturers which
existed under the Soviet Union, and a number of new joint ventures with foreign
manufacturers. The traditional Russian firms include AUTOVAZ (the largest producer,
with 63 percent of production), GAZ (recently the most successful financially, with 11
percent of production), UAZ, ZIL, IZMASH, KAMAZ, ELAZ, LIAZ and other smaller
firms. These traditional manufacturers use Russian suppliers, and so are able to
maintain some sales by having significantly lower costs. However, the Russian built
auto parts result in much lower quality vehicles. The traditional firms are largely unable
to move to foreign sourced parts to improve quality due to poor cash positions. Much
of the trade for auto parts within Russia is done through inefficient barter trade between
manufacturers and suppliers.
The vehicles produced by the new joint venture operations are largely semi knocked
down (SKD) assembly operations, use a high percentage of foreign parts content and
tend to be of better quality, but also of higher cost. GM, Ford, Kia, Daewoo, Fiat and
Renault have all set up joint venture operations to manufacture passenger vehicles in
Russia.
U.S. motor vehicle exports to Russia totaled $52.3 million in 1998, down 38 percent
from 1997. The peak year for U.S. vehicle exports to Russia was 1993 when total
vehicle exports totaled $131.9 million. In 1994 exports fell 57 percent, experienced a
brief period of growth and then began to decline again. The United States does not
have significant vehicle imports from Russia. In 1992, the United States imported
$171,000 worth of vehicles from Russia. For both 1997 and 1998, the United States
had zero vehicle imports from Russia.
U.S. Motor Vehicle Investment
General Motors:
GM has a joint venture with Elaz to produce a limited number of Chevrolet Blazers from
SKD kits in Elabuga. GM has also been engaged in negotiating a joint venture
operation with AUTOVAZ to assemble an Opel product, likely the Astra or Vectra.
Ford:
Ford has been engaged in discussions to produce passenger cars, likely the Escort of
Fiesta in the Leningrad region. Ford's main vehicle production targeted for the Russian
market is an assembly operation in neighboring Belarus. At this factory Ford produces
the Transit and Escort. Ford was forced to temporarily halt production in the Belarus
plant in 1998 due to slow sales in Russia.
Trade Barriers
Tariffs:
Passenger vehicle import duties and taxes depend upon whether a vehicle is imported by an individual or by a company. Individual persons pay a tariff of 5 ecus (European
currency units) or currently about four dollars per cubic centimeter of engine
displacement. Companies (dealers, businesses, organizations, enterprises, etc.)
importing passenger vehicles are subject to a more complicated and expensive import
regime.
Customs tariff rates are set on a graduated scale based on engine displacement. The
30 percent rate is based on the C.I.F. value of the vehicle.
Tariff Rates for Cars with Gasoline Engine
Engine Volume
(in cc) |
Customs Tariff |
| |
New Car (up to 3 years) |
Over 3 years |
| up to 1,000 |
30%, but no less than
1.1 Ecu per 1 cc |
30%, but no less than
0.45 Ecu per 1 cc |
| 1001 - 1500 |
30%, but no less than
1.3 Ecu per 1 cc |
30%, but no less than
0.5 Ecu per 1 cc |
| 1501 - 1800 |
30%, but no less than
1.35 Ecu per 1 cc |
30%, but no less than
0.45 Ecu per 1 cc |
| 1801 - 3000 |
30%, but no less than
1.9 Ecu per 1 cc |
30%, but no less than
0.55 Ecu per 1 cc |
| over 3000 |
30%, but no less than
2.5 Ecu per 1 cc |
30%, but no less than
1.0 Ecu per 1 cc |
Tariff for Cars with Diesel Engines
Engine Volume
(in cc) |
Customs Tariff |
| |
New Car (up to 3 years) |
Over 3 years |
| up to 1500 |
30%, but no less than
1.3 Ecu per 1 cc |
30%, but no less than
0.4 Ecu per 1 cc |
| 1501 - 1800 |
30%, but no less than
1.9 Ecu per 1 cc |
30%, but no less than
0.55 Ecu per 1 cc |
| 1801 - 2500 |
30%, but no less than
1.9 Ecu per 1 cc |
30%, but no less than
0.55 Ecu per 1 cc |
| over 2500 |
30%, but no less than
2.5 Ecu per 1 cc |
30%, but no less than
1.0 Ecu per 1 cc |
Taxes:
Imported vehicles must also pay:
- a 5 percent excise tax
- 20 percent Value Added Tax (VAT), which is calculated on the sum of the C.I.F.
value plus the tariff plus the excise tax
- a processing fee of 0.15 percent of the freight cost
Some vehicles may also be subject to a luxury tax of as much as 70 percent. Vehicles
purchased through a Russian-based dealership but ordered for a specific individual are
assessed duties under the individual, not company, tariff regime.
1998 Investment Decree
On February 5, 1998, President Yeltsin signed a decree that exempts foreign
companies from custom duties and some taxes, which are for automobiles and parts.
The decree requires companies to invest at least 1.5 billion rubles ($250 million) over
five years and to source half of their components domestically by the end of that period.
(During the first year 10 percent local sourcing is required, the second year 20 percent,
etc., until 50 percent is reached.) Therefore, this decree will only apply to companies
that are building vehicles in Russia. It is not clear how many vehicle imports might be
affected over the five year period. This decree could potentially be a Trade Related
Investment Measure (TRIM) in violation of World Trade Organization (WTO) principles
(Russia is currently engaged in negotiations to become a WTO member).
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