Subsidies for Russian car industry announced as high interest rates cripple sales

Car Factory RussiaSubsidies for Russian car industry: Russia’s Ministry for Trade and Industry today announced that it was to allocate RUB1.5 bn ($26m) to support the struggling domestic car industry, including subsidies aimed at countering the effect of high interest rates that have virtually brought the auto loan market to a halt. Last month, annualised sales fell by 38% as a combination of a major dip in consumer confidence and car loan rates climbing above the 20% mark took its toll.
Under the new scheme, the government will reduce the lending rate to 66% of the CBR’s provided the borrower puts down at least 20% of the car’s retail price. The move is expected to increase sales by 200,000 and has been given a cautious welcome by the industry. “The program can only help to lessen the depth of the market’s fall, to make it less catastrophic,” said Azat Timerkhanov, lead analyst at analytics agency Autostat. VTB24, the retail lending branch of state banking group VTB, said today that it had already begun accepting application for car loans at a rate of 9.57% under the terms of the new program.