May 07, 2014, 01:50 / Auto

The Ministry of Industry and Trade decided not to renew the preferential car loan program this year

In the first quarter of 2014, the production of passenger cars decreased by only 2.8%, but in the second quarter the market will decline more Yulia Gribtsova

S. Porter / Vedomosti

The Ministry of Industry and Trade's refusal to renew the preferential car loan program this year was reported by the department's press service. The ministry analyzed the results of the first quarter of 2014 and came to the conclusion that the closure of the program did not worsen the situation in the passenger car industry: the decline in sales, which last year reached a “catastrophic” 17%, now amounted to only 2.8%, the press service quotes the minister as saying Denis Manturov. He advises passenger car manufacturers not to wait for the resumption of the program, but to “work more actively with banks” so that they provide loans to corporate buyers of Russian cars on favorable terms.

The preferential car loan program was in effect from July to the end of December 2013 and provided for subsidizing from the federal budget part of the interest rate on loans for domestic and imported cars, as well as light commercial vehicles worth up to 750,000 rubles. During this time, 260,000 car loans were issued on preferential terms - the equivalent of 9.3% of all cars sold in Russia in 2013.

In March 2014, automakers and dealers began to ask the Ministry of Industry and Trade to resume the program, but the department cited a lack of money in the budget. At the end of April, Manturov said that the ministry was monitoring the situation on the market: until “fresh actual data” on passenger car sales appears, it makes no sense to talk about resuming the preferential lending program. In the first quarter of 2014, according to the National Bureau of Credit Histories (which stores information on 65 million borrowers), 194,107 car loans were issued in Russia - 10.1% less than a year ago. In money terms, issuance decreased by only 1% to 109.1 billion rubles. Car sales declined over the same period, according to the Association of European Businesses, by only 2%, and in March the same number of cars were sold as in March 2013. The weakening of the ruble helped contain the fall: manufacturers announced price increases and people tried to buy in time the car at the old price, the dealers explained. But this means that in May - June we should expect a significant drop, warned a top manager of one of the car dealer holdings. After the weakening of the ruble, manufacturers were forced to raise prices and this does not contribute to sales growth, states General Motors (GM) representative Sergei Lepnukhov, and if the ruble continues to fall, prices will certainly rise further.

The Ministry of Industry and Trade’s estimate for the first quarter looks disingenuous: car factories began optimizing production from the end of March, and in April they were already cutting shifts and stopping production, recalls a top manager of a car dealership company. The Nissan plant in St. Petersburg switched from three to two shifts in April; there will be no return to three shifts in the near future, a company representative said at the time. Back in March, the St. Petersburg GM plant did the same. The Ford Sollers plant in the Leningrad region stopped its production line for a week in mid-April and plans to do so at least once more.

The lack of state support is not a disaster, but it will still worsen the situation on the market - sellers of cars in the mass segment feel especially insecure and the lending program plays an important role there, says Andrey Gorshkov, sales director of the Jaguar Land Rover dealership of the Avilon Automotive Group. The second quarter will be worse than the first and perhaps the most difficult this year, he predicts. It is obvious that the market is facing a much more serious decline than in 2013, echoes Tatyana Fornasova, director of the Lexus Yasenevo dealership of the Rolf company. The discussion about the need for state support for the market has not yet been reached, she believes.