Old car disposal program starts bearing fruit.

MOSCOW, April 17 (By Itar-Tass World Service writer Lyudmila
Alexandrova) -- Russia's program for the disposal of old cars, launched on
March 8, seems to have begun to bear fruit, despite skeptics' grumbling.
This makes one hopeful the Russian automobile industry will be tugged out
of the crisis at last.
Russia's largest car manufacturer AvtoVAZ, which has encountered
enormous problems and has already cost the government a pretty penny,
plans to build up the output of low-budget rear-wheel drives nobody wanted
to buy just recently. They are in demand again.
The production of the Lada 2105 and 2107 sedans will be up by 76.3
percent to 17,600 pieces a month.
"A total of 45,900 vehicles are to be produced in May, which is 6.8
percent above April's target," AvtoVAZ said in a statement.
AvtoVAZ external relations director Igor Burenkov said the company had
received 117,000 requests for cars.
"Nobody has anticipated that there will be such a great demand, but it
must be satisfied," he said.
The Russian car market last March shrank in annual terms by only 7
percent to 127,000 vehicles after several months of strong recession.
The sales of cars under the utilization program range 400-600 vehicles
a day, the daily Vremya Novostei quotes the director of the automobile
industry department at the Ministry of Industry and Trade, Alexei
Rakhmanov, as saying.
"By now 15,688 cars have been sold, and 12,548 of them were AvtoVAZ
products," he said. At present about 2,500 certificates are issued a day.
"However, far from everything is smooth. We are still in a crazy
environment," Rakhmanov said, adding that all requests would be met.
The government has allocated 11 billion rubles for the old cars
disposal program, hoping to encourage the purchase of 200,000 new
Russia-made cars.
The owners of cars ten years old or older are invited to hand them in
for utilization in exchange for a 50,000-ruble discount (an equivalent of
1,700 dollars) off the price of a new car. The measure applies only to
Russian-designed and made cars or foreign makes assembled inside Russia.
There is only one way of putting the 50,000 ruble voucher to use - buying
a new car. It cannot be cashed. Nor can it help one buy a used car, or a
vehicle of foreign manufacture.
The program that will stay in effect till November 1, 2010 is a
replica of its European counterparts that supported Europe's car markets
in 2009. Both producers and dealers operating in Russia have been saying
that the disposal bonus is the most long-cherished market support measure
of all, because at the end of 2009 it turned out that the car market had
slumped by half.
In 74 regions there have opened 1,569 dealership offices. Most
dealerships involved in the old cars utilization scheme are those trading
Lada, Chevrolet and Opel cars. France's Renault is second in scope (108
centers) and Ford, third (94 centers).
"AvtoVAZ has timed its own special offer for the program. The one who
comes to the car dealer with the old car disposal certificate can buy the
low-budget Lada-2105 sedan for just 99,000 rubles (3,300 dollars), and any
standard model from the Lada Kalina family, for 199,000 rubles.
As follows from the plant's news release, the program has helped
AvtoVAZ increase sales in March by 70 percent against February. A total of
34,200 Ladas were sold. In the whole of the first quarter of this year
Russian customers bought 71,700 AvtoVAZ products. The 2105 and 2107 models
are most popular among the old car disposal program participants. In May
the plant plans to use one of its assembly lines entirely to make
low-budget rear-wheel drives and also to introduce extra work shifts on
Saturdays.
It looks like a similar solution has been selected in the Ulyanovsk
Region, where all local residents are entitled to another 70,000-ruble
discount on the condition they buy an UAZ vehicle. Sollers says that it
has already collected 1,000 applications for UAZ off-road four
wheel-drives and another 500 for Fiats.
The potential of car disposal bonuses is enormous. Russia has a total
of 38 million registered motor vehicles and 48 of them are older than ten
years. According to the Avtostat statistics agency, the fleet of cars ten
years of age and more is 17.7 million.
If the recent SuperJob.ru opinion poll is to be believed, seventeen
percent of owners of old cars plan to take part in the program. VCIOM
findings are still more optimistic - 40 percent.
At the same time Prime Minister Vladmir Putin said last week that the
car disposal program does not work the way the government would like it
to. He said the process must be the same any place, but "regrettably, in
some cities people have problems - time-consuming procedures to terminate
the registration of old cars and queues at dealer centers, in some cases,
artificial ones."
Also on the agenda is the idea of utilizing old trucks. A draft of
such a program has been submitted to the Cabinet and it will be discussed
in the near future soon.
Last month the government approved of a strategy for the development
of the national automotive industry till 2020. An estimated 1.2-1.8
trillion rubles will be required. And only in four-five years' time the
industry will get back to the pre-crisis level. And its share in the GDP
will be up from 0.98 percent to 2.4 in ten years' time. But for its
implementation the protective import taxes will have to be preserved for
another five years.
Also, the future of the Russian automobile market will largely depend
on an upturn in the market of car loans. In 2008 most sales (over 50
percent) were on credit. Today potential customers prefer to have a safety
margin, because it remains unclear where the credit market will move.

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