Vladimir Putin chaired a meeting on the development of the auto industry
Opening remarks by Prime Minister Vladimir Putin at a meeting on the development of the auto industry:
Good afternoon, colleagues.
Here in Yelabuga, we will discuss the problems of Russia's auto industry. We seriously considered these problems several years ago. Let's see where we stand: what we have accomplished and what has not worked as planned. Also, let's take some time to outline some plans for the future.
It is common knowledge that auto production is a kind of visiting card for many developed countries. This industry is an indicator of the level of technological culture and competitiveness of a national economy.
Today the Russian auto industry accounts for 3 per cent of the country's GDP, and provides highly qualified and well-paid jobs directly or indirectly for millions of our population.
Russia's domestic car market is developing dynamically. Forecasts for the foreseeable future predict it will become the largest in Europe.
Incidentally, in 2007, over three million cars were sold in Russia. In 2008, we are expecting sales of over four million. In terms of revenue, the auto sales totaled one trillion roubles, or 40 billion dollars, in 2007.
It has to be admitted, however, that in the past our domestic auto industry has seriously fallen behind, unable to meet the growing demands for quantity or for quality.
Last year, for example, only one quarter of the cars sold here were Russian domestic models. This means that the tens of billions of dollars we are spending annually on imported cars, only serve to develop other countries' economies.
I believe we have found a realistic way out of this complex situation, and made hard-nosed estimates, as opposed to meaningless rhetoric. We have opted for extensive international cooperation with various foreign auto companies, and also with strategic overseas investors. Additionally, we will work to maintain the holdings for current industrial-assembly operations in Russia.
This model of development is aimed at attracting high technologies and massive investments into the country, and not just to auto plants, but also to related enterprises - those producing raw materials and standard components.
Today, auto manufacturing should become innovatory in nature, generating demand for a skilled work force and promoting scientific and technological ideas, while stimulating small- and medium-size businesses.
As many as 23 industrial assembly plants are already operating across the country. Their output is expected to grow to 1.5 million cars by 2012.
In the long run, approximately 80 per cent of the cars sold in Russia should be produced within it. It is also necessary to meet social requirements such as the production of school buses and medical and public transport vehicles. And we should also boost our export potential.
Today, Vadim Arkadyevich Shvetsov and I have visited his enterprise. They are establishing such a production line. A very good enterprise, my congratulations to him once again.
We have in fact created a new profile for the Russian auto industry, and now should focus on its qualitative development.
First, we should increase domestic production, with more auto assembly plants and thus more units and spare parts produced here in Russia. This is a feasible task. We can do it and have the necessary resources to do it. We only require to increase investment in the sector, and to set in motion the process, including customs and tariffs regulations.
Second, the scarcity and high prices of supplies and materials are holding back production growth. This applies above all to high-quality steel.
I am sure our steel manufacturers will cope with this problem given reasonable time. Meanwhile, we should reduce import duties on steel that is not produced in Russia or produced in quantities insufficient for the auto industry. Of course, these measures should be coordinated with the steel supply side and with customs authorities in order to promote auto manufacturing and to increase steel production.
Third, we need an updated set of rules and regulations and effective law enforcement for vehicle production and use, and above all, updated transport safety standards.
Every effort should be made to renew our automobile fleet, which is extremely outdated. But in doing so, we should not forget our people, and remember that many of them, including old pensioners, have been using their cars for decades. For them a car is a family heirloom. And we should respect their rights and wishes.
Fourth, a few years ago the Government raised import duties on used cars. The effect was on the whole positive and boosted our auto industry. Our market stopped being a place where auto junk could make a profit.
Lastly, not only should we meet today's challenges, but also consider tomorrow's challenges. One example is commercial vehicles. So far, Russian producers control this market segment, but competition is growing fast, and decisions should be made to ensure the sustainable development of this key sector essential for defense and other industries.
In conclusion, I would like to stress one important point: auto production in Yelabuga is located in a special economic zone, where we stay today. From various remarks I have pieced together a history of its development from the end of 2005, through 2006 and 2007 and into the early months of 2008. It appears the zone has taken practically two years to get off the ground and to start moving. That is acceptable.
In fact, we are fulfilling our previous agreements and delivering on our promises.
At the same time, I would like to draw the attention of the economic development minister to some problems. I talked with several associates and they were full of thanks, but some wondered about certain mismatches.
I will begin with trifling details: a container terminal was designed for a certain number of containers, while actual demand is three to four times greater. Gas and electricity are supplied on a hook-up scheme, and no proper railway branch has been laid, although it functions more or less satisfactorily. I think plants in other economic zones are plagued by similar headaches.
We should also define a future intent for these special economic zones.
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Concluding remarks by Prime Minister Vladimir Putin at a meeting on the development of the auto industry:
I would like to begin by thanking all of you for such an interested and professional nuts-and-bolts discussion on the problems of the industry and its prospects for development. As previously mentioned, the automotive industry is a key component of any developed economy. Auto manufacturing has been described, you may recall, as a primary source of budget revenue in developed economies. One job in the auto industry creates ten or eleven jobs in related industries and helps to advance the steel, chemical and other key supplier industries.
In the minutes of the meeting, we have provided for certain measures to develop the auto industry. Our next step is to draft proposals to increase the automobile fleet in Russia, improve loan and leasing mechanisms, and generally update the auto-making industry.
The State Duma should amend Article 154 of the Tax Code on the value added tax charged on used cars. This measure will be socially just and economically wise. The state cannot repeatedly attach VAT to a product that has already been sold and taxed.
I took notice of the concern expressed by the Finance and Economic Development Ministries about insurance costs and transport tax. I agree with them. We'll give separate thought to these items.
Now as regards research and development. I fully agree with you here. It must be co-financed, if not fully financed. We are simply bound to get it moving. I asked the Ministries of Economic Development, Finance and Industry and Trade to pay close attention to this. In the absence of a federal program, we should consider other measures to support the sector and sort out its prospects for the future.
Now, we must consider support for the domestic production and marketing of trucks and buses including state leasing, technical regulation, and stricter management of imports. A lot has been said about this. Very close attention must be paid to these problems.
Now let's consider the prospects for the production of flat-rolled steel used in the manufacture of automobiles. As I understand it, everybody agrees that plans should be coordinated with steelmakers but some leeway must also be left for imports. Temporary deadlines must be set for reduced customs duties on the imported metal products needed by out automobile manufacturers. The required proposals should be submitted to the Government in the established procedure.
We must then assist domestic producers in marketing both at home and in export markets. A set of appropriate mechanisms and tools exist for this purpose in global practice and we should make full use of them.
We should also revert to auto production in the Siberian and Far Eastern Districts. And if we find an appropriate formula in our negotiations with the WTO, we should extend the range of industrial assembly and production of components, units and vehicles in line with our commitments, as previously mentioned.
This is especially important in the Siberian and Far Eastern Districts. Finally, in designing, building and re-engineering federal motorways, provisions should be made for roadside services and repairs, or lay-bys. Strange as it is, our regulations do not anticipate such possibilities.
Roadworthiness certificates and technical regulations must make vehicles safe and environmentally friendly. They should not be cumbersome or corruption-prone and should help our producers to exploit their natural advantages in making and selling their vehicles.
In the course of today's meeting, associates have put forward some proposals on what you consider important for the development of the auto industry in the country. These proposals will be studied and reviewed and taken into account in a document that will be adopted today.
Thank you for your cooperation. I wish you all the best.
