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MOSCOW. (RIA Novosti political commentator Alexander Yurov) - The North American International Auto Show in Detroit is perhaps the world's most prestigious. All carmakers without exception seek to present their products there. To give a good account of themselves, they bring fresh and even fantastic models.
This year visitors to the show could see comfortable electrical cars and cars with petrol-electrical power units. It was Chinese cars, however, that were the major sensation this year.
A carmaker's mere presence at a car show is not in itself a sensation. The Russian car industry used to present new models at foreign shows. This new phenomenon, though, is different. The pace at which Chinese carmakers have been evolving is dazzling.
The Russian car industry has been reformed for more than 15 years, and has already gone over a few rough patches... Back in the late 1980s and early 1990s several million dollars from the budget were spent on the modernization of a huge car plant in Moscow, but in vain. It never produced any decent models, and in late 2006 its lifeless facilities and the land under them were auctioned off to a buyer from outside the car business.
However, that wasn't the only problem the Russian car industry faced. Soon after the default of the ruble in the late 1990s, Russian carmakers found themselves in a unique price situation. Their products had been much cheaper than their foreign analogues for decades. Nevertheless, the industry did not experience a renaissance then either. As the ruble strengthened gradually, the national car industry lost its competitive advantages. Time was lost. Russians failed to develop a design that could replace outdated models.
Now Russian carmakers are living through another stage. The so-called industrial assembly regime has been in place in Russia for more than a year. Under its terms, carmakers are allowed to import mounts and sets for car assembly with almost no customs duty. As a result, almost all of the world's leading carmakers have signed special agreements with the government. Local companies have also signed such agreements. Several new car plants are assembling popular foreign cars in Russia now. New plants will be commissioned soon. However, the government program is aimed at supporting its own car market rather than entering foreign ones. If China is currently establishing its car industry, Russia is solving the problem of modernization.
Today, the Russian car industry has an almost up-to-date passenger car that is selling more or less successfully, unlike a range of outdated models. However, it will be considered retro in another two to three years. Russia's largest carmaker, AvtoVAZ, has announced the development of a promising model, which was presented as the Ts project at the car show in Moscow last August. This is a nice modern car, but it is not clear whether it will still be so in three years when it is commercialized.
Meanwhile, experts say that the Russian market could now total 2-2.5 million new cars a year. Russian carmakers sell about a million cars, and all foreign carmakers combined sell another million. The share of foreign car sales in Russia continues to increase, and the volume of Russian car sales has remained unchanged for the last few years. Nothing seems to be able to change the situation. The Russian car industry continues to stick to the old system of selling a large number of outdated models.
Addressing a conference on the prospects of the Russian car industry, Andrei Kushnirenko, deputy director for trade negotiations at the Russian Economic Development and Trade Ministry, reminded Russia's elite carmakers that they still had time to modernize. The first change in the rules for carmakers in Russia will be made only a year after the country's accession to the WTO, that is, after 2009. A seven-year transition period will follow, during which import duties on new foreign cars will be reduced from the current 25% to 15%. It will be cut by 3% in the first four years and 7% afterwards. Import duties on trucks and some buses will not be lowered. Local carmakers will receive another breathing period that will last at least seven years.
However, most analysts believe that such privileges will not be a reason to relax. The Russian government has asked for another "transition period" on the international arena. Carmakers already had a similar break in the 1990s. Then, at negotiations with the EU, Russia demanded a 10-year transition period for some industries to adapt to global trade. However, the situation did not improve in many sectors, including the car industry. While some sectors are evolving fast and entering foreign markets, the Russian car industry is stagnating.
Speaking of Chinese victories, the U.S. market is not the only one to have taken an interest in Chinese cars. Sales of Chinese cars on the American market certainly do not look very promising right now, since their design and technology is still behind global car-making champions. However, this is just their debut. Chinese cars have surpassed all the rest in another category: their price was much lower than that offered by their potential rivals.
A few years ago the first Chinese cars emerged in Europe and Russia. The Old World's car industry was shaken and responded by conducting a crash test. Neither of the Chinese cars presented on the market passed the safety test. Time has shown that the Chinese are quick to learn. A year later much better samples appeared on the market. Chinese cars also meet the current Russian standards. Moreover, new Chinese cars in the best-selling category of less than $10,000 are now popular in Russia. Naturally, Chinese cars are also sold in other price categories. However, the fact that China targets this price category alarms national carmakers. Until recently, Russian buyers have been forced to choose between three models similar in their price and quality: Russia's Lada, South Korea's Hyundai Accent and France's Renault Logan. China's Chery Amulet has now joined them. And other much cheaper models are on the way.
However, with its export ambitions, Russia could surprise America with its own designs, rather than just offering slightly modernized home-grown remakes of formerly popular cars. Take the UAZ Patriot, a Russian off-road car. It attracted crowds of foreigners at the Moscow car show for its modest price and reasonable quality.
The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.
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