Russian Car Dealers Split Over Proposed Increase in Recycling Tax

The Russian Association of Automobile Dealers (ROAD) has requested Prime Minister Mikhail Mishustin to postpone the proposed increase in the recycling tax, fearing it could drastically reduce the number of new car buyers and lead to dealer bankruptcies. The organization, representing over 1,600 dealerships, warns that increasing the tax could shrink the market, with new car sales potentially falling to just 600,000 units annually by 2030. ROAD also fears that the higher tax could severely impact car production and parts manufacturing in Russia, potentially leading to factory closures and job losses.

However, the initiative has faced opposition from other industry players, particularly dealers of the Lada brand and the International Association of Dealers (IAD). These groups argue that the tax increase is necessary to curb the influx of imported vehicles lacking long-term warranties and proper servicing infrastructure. IAD supports the tax hike, claiming it will drive investment in Russia’s automotive industry, especially from Chinese companies, by encouraging local production and supplier partnerships.

The Ministry of Industry and Trade (Minpromtorg) proposed the tax increase in mid-June, with plans to implement it from October 2024. The ministry argues that the tax will not affect the cost of domestically produced vehicles, as the government plans to compensate for the additional costs for companies with localized production. However, ROAD counters that the tax increase will disproportionately affect imported vehicles, driving up prices and reducing market competitiveness.

As debates continue, the potential impact on car prices looms large. ROAD predicts that the proposed tax increase could double car prices by 2030, further limiting the ability of Russian consumers to purchase new vehicles. The organization highlights that in 2014, 33% of Russians could afford to buy a new car, but by 2023, this figure had fallen to 14%. The proposed tax increase could reduce this further to just 5-7% by 2030.