“Kommersant”: “Ministry of Industry and Trade announces massive car disposal programme”
The payment of bonuses for the purchase of new cars may be started in March.
The Ministry of Industry and Trade promises to start paying car disposal bonuses in March. The bonus amounting to 50,000 roubles will be paid to car owners with cars older than ten years if they agree to buy a new car in exchange for the old one. Similar measures taken in Europe boosted car sales even during the crisis. However, the government has not yet approved a law on car disposal, and the car disposal facilities and dealers who will pay bonuses have not yet been named.
Yesterday, Prime Minister Vladimir Putin met with Minister of Industry and Trade Viktor Khristenko to discuss the programme for scrapping cars older than ten years. This is the government's latest attempt to revive the Russian auto market, which has registered the world's most tangible fall of late (50%-60% a month). Other measures taken in 2009 (such as a partial compensation of interest rates on car loans for some models) have proven a failure. Under the new programme, a car owner who has a car older than ten years and is ready to have it scrapped and buy a new one will get a 50,000 rouble discount on the price of a new car produced or assembled in Russia. Actually, this programme is of the same ilk as the European programmes launched in 2009, which helped to increase car sales in many countries.
The 2010 federal budget earmarked 10 billion roubles for the purpose, which means that 200,000 new cars may be sold under the programme.
It was first proposed that the programme should be launched only in pilot regions (such as Moscow, St Petersburg, the Samara, Nizhny Novgorod and Ulyanovsk regions); now it will cover the whole country.
The procedure is as follows: a car owner with a car older than ten years comes to a dealer authorised by the Ministry of Industry and Trade to participate in the trade-in programme, processes a power of attorney for the dealer's actions related to the car disposal, and pays a fee for the respective services (up to 3,000 roubles). The car subject to scrapping must be used by the owner for no less than a year, and it must not be involved in any serious traffic accidents or registered as stolen. After the car is scrapped, the dealer issues a 50,000 rouble certificate to the car owner for the purchase of a new car. The Ministry of Industry and Trade compensates for the dealer's expenses.
Viktor Khristenko assured the Prime Minister that his ministry was ready to launch the programme as early as March 15. Vladimir Putin proposed another date—March 8—and the minister agreed with him. However, he admitted that to make the programme effective, the government will have to prepare some regulatory acts clarifying the issue. A major hindrance to the programme is the lack of car disposal facilities, of which there are merely 12-15 now (according to the ministry's data).
Mr. Khristenko said yesterday that the ministry was ready to subsidise the delivery of used cars to car disposal facilities by the dealers, when there are none in the given area (this will cost the budget another 1 billion roubles). An automaker's representative says that at the first stage, the government is ready to provide a discount [on the price of a new car] to users of old cars and also take care of the disposal. Moreover, there is no vehicle scrapping law in Russia. A working group of the Ministry of Industry and Trade is drafting it now.
The current version of the programme does not look like a final one, says Mikhail Pak of Aton Investment Company. The ministry admits, for example, that it does not have criteria for selecting dealers. It emphasizes that it must merely approve the list of dealers, while the automakers themselves must submit the criteria. However, none of the automakers could do so when asked by Kommersant. The dealers do not have them either, says Igor Ponomarev, head of Genser's board of directors. It is not yet clear how the programme will operate, he adds.
Considering the funds allocated for the programme, even if it works, it will increase car sales in Russia by no more than 14% (from the 2009 projected sales of 1.4 million). Also, automakers say that by advertising the programme, the government creates a deferred demand, further restraining sales that are falling anyway. The consumer is waiting for discounts and putting off the purchase of a new car.
Dmitry Belikov
