What Will Save The Russian Car Industry?

Russia has agreed to walk on the footsteps of few European countries and the US by launching a car scrappage scheme in an effort to save the country’s automotive industry. But experts are sure that only this scheme will not be sufficient to positively energize and modernize the Russian car industry.

There are many added factors that make the process of renovating the Russian car industry much more complex than in many other countries. Among them are, the exploitation of budget funds and lack of a practice of creating absolutely competitive cars.

Another major problem is that large number of people are occupied by crisis-hit companies, but the car makers were unable to fire enough people. Huge job cuts would inevitably result in social controversies.

Price-quality ratio: In 2008 many experts were confident that by the end of the year it would overhaul Germany to become the biggest on the continent. But, the global financial crisis resulted in collapse in demand, and in 2009 the Russian car market diminished by half.

In the starting of 2010 sales started falling, while major worries remained about the future of the  complete industry, especially in weak Avtovaz, that makes Lada cars. Foreign cars evolved into much more affordable, as many prominent global brands had launched assembly plants in Russia. Price-quality ratio, that used to be Russian car makers’ major advantage for decades, has disappeared almost completely.

New reality: For decades, Russia’s car makers have been presenting many concept cars at various industry events, but after many years only few of them were converted into models that are sold to consumers. Lack of investment is the major problem for the companies.

Global partnerships: Experts recognize that the Russian car market is attractive in the long-term for both present and potential investors, as the cars per person in the country is less than in the West. Many analysts suppose that association of well-controlled government investment and the effective scrappage scheme would help to restore the market.