Demand for cars shrinking, Industry and Trade Ministry pledges support

The Russian Ministry of Industry and Trade has posted a document on, an official website for draft regulations and legal acts, extending the Family Car and First Car preferential lending programs to families that have only one minor child. Earlier, only those with two or more minor children were entitled to easy car loans under those programs.

The Ministry also proposed raising by 50% the maximum cost of cars that can be purchased with a preferential loan under these programs, from RUR 1 mio ($12,550) to as much as RUR 1.5 mio ($18,825).

Interestingly, the Ministry believes the change will not only boost sales of new cars and help the domestic auto industry this year, but will also support large families by helping then afford a larger and better vehicle – seven-seater cars and SUVs will be on the new list of models available under the programs.

“The proposal is to increase the maximum price of eligible vehicles to RUR 1.5 mio, which will allow large families to purchase, on more favorable terms, new cars that meet all safety requirements and carry up to seven people,” the explanatory note to the draft government resolution says.

Indeed, RUR 1 mio can buy few brands and models now available on the Russian market. They mainly include the entire range of LADA vehicles (except, perhaps, the LADA Vesta Sport), as well as UAZ (except high-end modifications) and Datsun. In addition, there are a number of Korean (Hyundai and KIA), Japanese (Nissan) and European (Skoda, Renault, and Volkswagen) brands with basic options or close to them.

With the maximum car loan increased to RUR 1.5 mio ($18.8K), consumers will be able to choose not only from the top configurations of such crossovers as Renault Duster, Renault Kaptur and Hyundai Creta but also from several crossovers that are just reaching the Russian market, including Skoda Karoq and KIA Seltos.

A car purchased under the First Vehicle program can now be an electric car. It has been proposed that the program covers electric vehicles as well. Moreover, electric car buyers are supposed to get a 25% discount on the advance payment.

At the same time, the correlation between the sales dynamics for new vehicles in the Russian market noted by the Autostat news and analytics agency led to the review of the car market dynamics forecast for the end of 2020. It is expected that if the ruble continues to fall, in the worst-case scenario the sales may drop by 34% as of the end of the year and the car market will shrink to 1.08 mio sold vehicles.  

Still, experts argue that negative developments are unavoidable even in the most positive circumstances when the predicted drop in sales stops at 12% and the number of sold vehicles is around 1.43 mio.

Currently, the main conditions that Russian citizens must meet to be able to purchase a vehicle under the First Vehicle and Family Vehicle programs are having two minor children and no previous vehicle purchases.

By Taras Fomchenkov

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