Why this is important to Wisconsin businesses: With domestic demand not matching up to production capacity, the Russian government is subsidizing exports.
According to a recent World Bank report, Russia’s economic decline has slowed considerably due to growth in such sectors as services, construction, transport and communications. The forecast also cited figures showing an increase in domestic demand for goods, even as external demand for Russian products remains weak.
In the automotive sector, German company Daimler, the parent company of Mercedes-Benz, plans to sign an investment contract to construct an auto manufacturing plant in the Moscow region. Construction is expected to cost more than €300 million, according to Russian Minister of Industry and Trade Denis Manturov. The investment project is expected to be signed by the end of the year, and the plant will produce premium-class SUVs, with an anticipated production volume of 25,000-30,000 vehicles per year.
In the fall of 2016, the Russian government decided to undertake initiatives to support the automobile industry for the first time in recent history, including export subsidies of $50 million. Subsidies also apply to vehicles of foreign brands that are manufactured in Russia.
In 2016, growth in demand for foreign cars assembled in Russia has been seen in CIS countries and the Middle East. Export promotion is getting increased attention now. For example, Nissan plans to deliver its Datsun model, which is assembled in Russia, to the Middle East, and Hyundai plans to export cars produced in its St. Petersburg plant to Georgia and Tunisia. A representative of Renault indicated that the French auto manufacturer plans to export its Dacia Logan and Sandero Stepway models, both assembled in Moscow, to Vietnam.
Russia has the capacity to produce 3 million cars right now, but market demand is estimated at less than 1.5 million.