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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

Wednesday, July 30


SPIBA continues their series of Look@It tours, which focus on the success stories of major brands in the St. Petersburg market. Today’s event will focus on the Gorky Golf Club and will also be held there. For more details visit spiba.ru



Thursday, July 31


Develop your leadership abilities during a lecture by famous Russian author and coach Radislav Gandapas. The event starts at 9 a.m. at 5 Lodeinopolskaya Ulitsa. The price for entry is 20,500 rubles ($570).


Relax and enjoy a Parisian atmosphere with some romantic and laidback jazz tunes during the Night of French Music at Lenny Jam Cafe, 63 Ligovsky Prospekt. The entrance fee is 250 rubles ($7).


The Women’s Business Club is hosting a Beauty Brunch where participants are invited to discuss the latest news in the beauty industry and listen to lectures by professional stylists in the business.



Friday, Aug. 1


Bikers from all around the world will gather to take part in a parade, extreme shows and rock concerts during the International Biker Festival that revs its engines today and runs through Aug. 3 near Olgino Hotel, 4/2 Primorskogo Shosse.


The Peter and Paul Fortress will be turned into an open-air cinema today and tomorrow as part of the 5th International Short and Animation Film Festival. A huge screen across the fortress walls will air short films non-stop with board games, photo sessions and other activities also on offer for visitors. For more information, visit www.opencinemafest.ru



Saturday, Aug. 2


Gatchina Palace Park Museum will host its second annual Night of Light, an impressive audio-visual show across the night sky. Tickets are 600 rubles ($16).


If graphic design is more your thing then check out Illustration Day, where you will be able to visit an exhibition, attend lectures by professionals and even show experts some of your own work. The event starts at noon at Zona Deystvia, 73 Ligovsky Prospekt. The entrance fee is 350 rubles ($10).



Sunday, Aug. 3


History lovers shouldn’t miss the chance to see reenactments of World War I battles in Pushkin at noon. Besides exciting war scenes, visitors can enjoy live music, historical costumes, an equestrian show and a fancy-dress parade starting from the Moscow gates.


Garage Sale, the popular and growing flea market where nothing is priced over 500 rubles ($14.11), starts today at noon in Loft-Project Etagi, 74 Ligovsky Prospekt. Be sure to get in early to score a bargain. Entry costs 50 rubles ($1.40)



Monday, Aug. 4


Continue the working week with a calm and steady mind with a free yoga lesson at 7 p.m. in the Bukvoed store at 23A Vladimirsky Prospekt.



Tuesday, Aug. 5


Visit The Romanov Dynasty doll exhibition today, where more than fifty porcelain dolls depicting Russian rulers, and made by Olina Ventzel, will be on show. The exhibition continues through Aug. 31 in Sheremetyev Palace, 34 Fontanka Naberezhnaya.



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