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Ruble Devaluation May Save Russian Car Production

Published: July 11, 2014 (Issue # 1819)



  • Russian car sales plunged 17.3 percent in June, compared with 2013.
    Photo: Wikimedia Commons

While the ruble devaluation has devastated car sales and much else over recent months, it has simultaneously served one of the state's long-term aims: to localize car production in Russia.

The president of AvtoVAZ, Russia's largest car producer, on Thursday announced plans to increase domestic production from an already hefty 84 percent of all components to 90 percent.

"Increasing the localization of production is the main trend for me," AvtoVAZ president Bo Andersson told journalists at the ongoing Innoprom industrial trade fair in Yekaterinburg, Prime reported.

With special government agreements with automakers to expire in 2019, and customs duties on imported cars to decline from 25 to 15 percent in the coming years due to Russia's accession to the World Trade Organization, it had appeared that localizing production in Russia would lose its cost-cutting appeal.

But the decline in the ruble exchange rate has come to save the day for Russian car production. "Localization is the key way to control costs and to remain competitive on the market," said Vladimir Bespalov, an analyst at VTB Capital.

VTB Capital expects the ruble to continue to depreciate over the coming years. So too does Russia's Economic Development Ministry, which in its base forecast has predicted the exchange rate will gradually rise to between 38.3 and 39.3 rubles to the dollar in 2017, ITAR-Tass reported.

"If production is not localized, this will inevitably either put pressure on costs or will force the producers to increase prices, which will make them less competitive," Bespalov said.

The devaluation has also, of course, had its negative impact, playing a role in the market's collapse of 17.3 percent in June and with 7.6 percent over the past six months compared to the same periods in 2013, according to the Association of European Business.

Joint venture Ford Sollers, which handles all production of Ford vehicles in Russia, has been one of the hardest-hit this year, with sales falling 53 percent this June compared to last year and 39 percent since January.

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ALL ABOUT TOWN

Thursday, July 24


Liliana Modiliani, a well-known Russian stylist, will talk about choosing clothes that fit during her lecture at 7 p.m. at the Pryamoy Efir art club, 13 Viborgskoe Shosse.



Friday, July 25


Discuss Russia’s economic and political prospects for 2014 during a Business Breakfast organized by SPIBA at 9.30 a.m. in the Bank Saint-Petersburg office at 64


Malookhtinsky Prospekt.


Start your weekend with adorable miniature pigs at the Squealing Pig festival at 7 p.m. this evening in the Karl & Friedrich restaurant, 15 Iozhnaya doroga, on Krestovsky Island.



Saturday, July 26


Hundreds of brand-new and retro cars, drag and drift shows, test drives and karting are planned for the Avtobum-2014 festival, which will take place in front of the RIO shopping center at 2 Fuchika Ulitsa.


Participants in today’s SaniDay Summer competition will impress visitors with their hand-made, unusual and hilarious boats, which will race at the Igora Resort near the 54th kilometer on Priozerskoe Shosse.


Metro Family Day will include both serious lectures for adults and master-classes for children, making the event interesting for the whole family. To participate, come to Kirov Park on Yelagin Island.


Photography will be the focus of today’s Photosubbota, which features lectures by famous photographers, meetings with photo schools and studio representatives, and participation in a photography competition. The event starts at noon at Petrokongress, 5 Lodeynopolskaya Ulitsa.


If you like cycling, make sure to visit the Za Velogorod Festival with its retro bike exhibition, market and live music. The second round of the Leningrad Criterium race will also take place during the event at Petrovsky Arsenal in Sestroretsk.



Sunday, July 27


Navy Day will be celebrated with a weapon and military transportation exhibition, self-defense master classes and concerts. The event starts at 1 p.m. in the 300th Anniversary Park of St. Petersburg.



Monday, July 28


Don’t miss a chance to see the latest achievements in robotics during the RoboDom interactive show, exhibiting more than 150 robots. The show will be at BUM center, 22/2 Gzhatskaya Ulitsa, until Aug. 3. The entrance ticket costs 350 rubles ($10).



Tuesday, July 29


A video of a Queen concert from 1986 will be shown today at 8 p.m. in Yaschik, 50/13 Ligovsky Prospekt.



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