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27 Feb, 2009 09:06

Car support gives local producers a rev

Russia's controversial tax on car imports has pushed locally made cars to the top of January's sales charts. But the WTO and governments from Japan to Europe have criticised Moscow for protectionism.

Before the economic crisis experts were predicting Avtovaz could collapse. But new figures show Russia's four best-selling models last month were Ladas. The government's raft of measures, most controversially hiking duties on used car imports to 30%, has moved Russians to buy Russian, according to Aleksandr Shokhin, President of the Union of Industrialists and Entrepreneurs.

“The subsidies, loans and import taxes should let carmakers produce just enough to avoid mass lay-offs.”

Moscow was wary of upsetting trade partners when it was keen to join the WTO. But in the crisis, VTB Analyst, Elena Sakhnova, says those plans have gone off the road.

“We expect to see significant reduction in demand, probably 20 to 30% for this year. Russian brands will suffer less, they may even show flat output. Russian government made correct decision to support domestic market. It is still not clear when we'll enter WTO. I would say definitely not within the next couple of years.”

Other states won't retaliate as they're propping up automakers themselves. Germany's announced $2.5 billion incentives for its car buyers, Sweden's offered $3.4 billion to Saab and Volvo, while Washington's to lend GM and Chrysler more than $17 billion.