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   May 18
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Analysis & Opinion
18.01.10 New Junk For Old Junk

Starting March 8, the government will ask Russians who own old foreign-made vehicles to exchange them for a certificate worth 50,000 rubles (approximately $1,700), good for purchasing a new Russian car or a foreign model that is produced domestically. The exchange program, announced at Prime Minister Vladimir Putin’s recent meeting with the Minister of Industry and Trade Viktor Khristenko, is modeled after similar successful schemes in other countries, such as the American “Cash for Clunkers” and others in Germany and the Netherlands.

“Anyone whose car was made in or before 1999 and who has owned it for at least a year can take part in the program,” Khristenko said. The program’s budget is ten billion rubles ($340 million), which is enough to purchase some 200,000 new cars. The program is supposed to work for a year, but can be extended if successful.

The main goal of the program is to support the biggest Russian automaker AvtoVaz, brought to near-bankruptcy by the financial crisis. Data from the non-state Autostat analytical agency shows that AvtoVaz’ sales have fallen by 44 percent in 2009. In comparison, in the same period the sales of BMWs have dropped by 11 percent, and of Audis – by 12 percent. Citroen and Hummer have actually seen growth during the financial crunch.

Besides propping up AvtoVaz, the program is expected to have some other positive effects. Old cars are one of the main factors contributing to air and soil pollution in big cities, and decreasing their number will be good for the environment. Secondly, for Russians with low incomes, partaking in the program may be the only way to buy a new car.

However, at present many are skeptical that the program will work at all. The opinions of car owners range from “it’s a great idea” to “I will never use a car made in Russia, even for free.” “In 1996, I made a decision not to buy any car produced locally, and I’ve never regretted it,” wrote a blogger who goes by the nickname of Dmitry. “Any 15-year-old foreign-made car is better than a new Lada. A discount of 50,000 rubles is not enough to change your preference.”

Auto experts are also less-than-optimistic about the exchange program. Andrew Toptun, an analyst at the Autostat agency, believes that the new program will not have a notable effect on Russia’s car market. “The announced 200,000 new vehicles to be purchased by the program make up for less than ten percent of Russia’s car market,” he said. He also believes that the most controversial part of the program is recycling the old cars. “There are few factories in Russia that are able to recycle clunkers. They are located near Moscow, Saint Petersburg and several big cities in Siberia. Is it not clear how the other regions in the country will solve this problem. Transporting old cars to existing recycling facilities might be too expensive,” he added.

The idea of getting rid of old cars is not new. Plants that recycle cars do operate in Russia, and anyone living in a big city can exchange their old car for money even before the new program goes into effect. However, the price of an old car rarely reaches 50,000 rubles. “The average price we pay for old, rusty cars that are out of service is 5,000 rubles ($170),” said Nikolay, an employee at the Moscow-based Avtoskupka Company that buys old vehicles for spare parts and scrap metal. “Selling an old car this way takes just 20 minutes.” He believes that the program announced by the government will not affect his company’s business. “The process of exchanging a car for a voucher and then buying a new car may be too complicated and bureaucratic, as most government programs are in Russia. This idea probably won’t attract too many people,” he said.

The environmental advantage of the new program is also debatable. One condition of the program is that only fully-equipped cars can be exchanged for vouchers. “It means that most of the clunkers left to decompose on the city streets and backyards will stay there,” said Alexey Kiselev, an expert from the Toxic Programs Department at Greenpeace Russia. He believes that only a few old cars that are now being used at open air markets to transport produce can be replaced with new models though the exchange program. “It is possible to solve the problem of old cars piling up in cities,” he said. “We need a special law to establish the manufacturers’ responsibility for clunkers.”

This kind of law exists in many West European countries. “For example, car manufacturers in the Netherlands have to collect aged vehicles from their owners and recycle them at their own expense. Germany has a similar law. This system works perfectly.”

But, despite the experts’ doubts, AvtoVaz remains optimistic about the likelihood of the program’s success and its future sales. In 2010, the company plans to produce about 446 thousand cars, including about 40 thousand for export, which is 51 percent more than last year. AvtoVaz expects to receive some 50 billion rubles in aid from the government this year.

About half of Russians believe that the government should support AvtoVaz, a recent poll by the All Russian Public Opinion Research Center (VTsIOM) found. However, fewer respondents are ready to buy locally-produced cars. Most patriotic car owners are people aged 50 to 65, or young people aged 18 to 22 who want to buy their first car but can’t afford a foreign brand.
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