Imported Cars Subject to Higher Fees as Russia Plans Increase in Domestic Production, Reports Reuters

Russia is set to raise taxes on imported vehicles starting in 2025, primarily by doubling the scrappage fees that all car manufacturers are required to pay, alongside increasing governmental support for domestically produced cars, according to draft budget documents released on Monday.

The landscape of Russia’s automotive market has dramatically changed since the country’s invasion of Ukraine in February 2022, with numerous Western automotive brands exiting the market and Chinese manufacturers stepping in to fill the void.

The proposed budget indicates that Russia anticipates nearly doubling its revenue from car recycling in 2025, projecting an increase to 2.01 trillion roubles from 1.08 trillion roubles.

Scrappage fees for imported vehicles are expected to rise to 1.14 trillion roubles next year, up from 680 billion roubles, while fees for locally manufactured cars are projected to increase to 871.5 billion roubles from nearly 400 billion roubles this year.

Both domestic manufacturers and vehicle importers in Russia are mandated to pay scrappage fees to help cover the future costs associated with the scrapping process managed by the state. However, these higher fees will be counterbalanced by increased subsidies for locally produced vehicles, aimed at mitigating some of the production costs.

As a result, imported cars may become more expensive in relative terms, which could drive Chinese automakers to consider relocating some of their production to Russia to maintain competitiveness.

Domestic car production in Russia reached a post-Soviet low in 2022, following the abrupt suspension of operations and eventual exit of Western automakers that previously operated factories in the country.