A recent proposal by Russia’s Industry and Trade Ministry to impose a transportation tax that is linked to a car's emissions standard has the potential to not only lower the country’s carbon footprint but also to stimulate new car sales in Russia.
Increased Taxes for Cars With Low Ecological Standards
As first reported by Vedomosti, the proposal would increase taxes on cars that do not meet Euro-4 ecological standards, while taxes on Euro-5 standard engines would be lowered. According to Andrey Dementyev, deputy minister of industry, the new system will motivate the Russian population to buy more cars with higher ecological standards.
"It's the right decision, which will spark Russians to get rid of junk cars," Vladimir Vidulov, a spokesman for auto industry researcher JATO Dynamics, told the Moscow Times. "It won't lead to a serious hike in prices for cars, since technology now makes it possible to cheaply mass-produce modern catalytic converters."
Similar to Cash for Clunkers
The program’s goals are largely similar to that of the cash for clunkers program, implemented by the Russian government to boost the automobile industry and rid the country of old cars with poor emission rates. This program has been so successful that Prime Minister Putin recently pledged 14 billion rubles ($456.6 million) to extend it until 2011.
These incentive initiatives offer two main benefits:
1. They contribute to President Medvedev’s continued efforts to reduce carbon emissions and improve Russian energy efficiency, which are among the top priorities for modernizing the Russian economy. The president recently urged senior Kremlin and government officials to ramp up efforts to reduce Russia’s energy waste and make the country’s technology more ecologically competitive. In his speech in July 2010, he stressed the need for the “integration of innovative technology and programs for improving energy efficiency into national projects,” stating that these must be “absolutely practical discussions, rather than speculation on the issue."
2. The transportation tax and cash for clunkers program have created momentum for the recovery of Russia’s automobile industry. Russian carmakers have experienced significant growth in recent months, as reported in a recent Modern Russia post on Japanese car makers’ interest in Russia.
In More Recent Auto Manufacturer News:
Hyundai Motor announced it completed construction of its first automobile plant in Russia and plans to nearly double its sales in Russia to 130,000 vehicles next year.
Starting this January, the Korean carmaker’s new plant, located in St. Petersburg, will begin producing the new C-class Solaris, which is a subcompact car tailored specially for the Russian market. “We want to focus on making our first 'made in Russia' cars succeed and effectively localize so as to make it Russia’s best model,” a Hyundai Motor official said. The plant’s opening ceremony was attended by Prime Minister Putin, who said in his remarks that the plant “signifies that modern technology and high production standards are coming to Russia, creating high-tech, prestigious and well-paid jobs.”
Later that day, Prime Minister Putin attended the opening ceremony of another plant in the St. Petersburg area, this time by Canadian auto parts maker Magna International. Magna in fact announced the opening of three plant facilities around St. Petersburg, representing a total investment of $97 million. “We expect the Russian automotive market to grow significantly,” Magna CEO Don Walker said in a company statement. “We have expanded our footprint to help our customers grow in this region as well as regions around the world, especially on global platforms.”
Will this tax on cars impact you? What are your thoughts about the focus on more environmentally friendly standards and car production in Russia?
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