Russia to invest $6B in autos by 2020, source says

ERJ staff report (AN)

Moscow (Reuters) -- Russia will invest about 180 billion rubles ($6 billion) in its struggling carmaking industry over the next decade in a bid to revive the sector after its disastrous 2009, a government source told Reuters.

The sum will be about a tenth of the $60 billion investment envisaged by the government for the sector, with foreign and domestic automakers contributing the bulk. The government sees domestic car sales matching pre-crisis levels by 2014 or 2015.

"If we want to be noticeable players in this game it will not happen at no cost," the high-ranking government source, speaking on condition of anonymity, said on Wednesday.

"Despite the bad shape of the industry today there are concrete perspectives, concrete plans," the source said.

The comments came ahead of a government meeting today which is expected to discuss the future of its money-losing auto industry, which employs hundreds of thousands of people, many in one-industry towns where there are few alternative employment opportunities.

"Despite the seemingly large amounts, these numbers should not impress you too much," the source said of the investment plans. "They are comparable with the research and development costs of any large international auto company."

Russia suffered particularly badly during the worldwide collapse of the auto industry, as the weakening ruble and lack of access to credit saw sales halve year-on-year in 2009 to 1,465,917 units.

Parity principle

The source said restructuring the auto industry is part of Russia's long-held goal of diversifyng its economy away from its current dependency on oil and gas and other natural resources.

"If we are talking about modernization, without the auto industry it is a waste of time," he said.

He added that the government is keen for Western carmakers to continue their partnership with local players, but would cap their ownership levels at 50 percent.

"Either it should be a Russian firm in control or it should be a project based on parity principle," he said.

Renault SA is currently a 25 percent shareholder in Lada maker AvtoVAZ, while Germany's Daimler AG is a shareholder in truck manufacturer KAMAZ.

Fiat S.p.A. and privately owned Russian automaker Sollers last month launched Russia's biggest auto joint venture with backing from the state.

The source on Wednesday said government-owned bank VEB would be offered a 10 percent stake in the Fiat-Sollers partnership.

He added that the government wants to promote Russian acquisitions of foreign companies, and would put aside about 150 billion rubles to back any future moves.

From Automotive News (A Crain publication)