Russian government will pump an additional $177.1 million into its car scrappage scheme

Article by Christian Andrei, on April 6, 2011

The government of Russia will bring into its scrappage scheme an additional fund of 5 billion roubles ($177.1 million), the country’s prime minister, Vladimir Putin, disclosed in the government’s Web site.

Prior to the announcement, Putin requested the government to extend the scheme, which had officially expired when March ended but the vehicle owners’ certificates to purchase new cars remain valid until September. The scheme has now been extended until the end of this year.

The scheme, which was introduced in March of last year and gives 50,000 roubles to individuals who will trade in their vehicles that are at least 10 years old, has contributed greatly to the improvement of the sales of locally produced cars after the country fell into the economic crisis.

It also generally benefited the AvtoVAZ of Russia. The country was previously on track to achieve its goal to be Europe’s biggest auto market, outperforming Germany.

But then the economic crisis happened and this adversely affected the demand. Specifically, sales experienced a 50% reduction as credit access dried up and consumer confidence was dampened. Putin mentioned in his request to the government that the scheme “has been very effective.”

With this measure, coupled with the pent-up demand, the Association of European Businesses (AEB) is anticipating that the annual auto sales in the country will go back to its pre-crisis levels of 2.9 million units by 2012.

Topics: russia

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