Euro-0 engine ban will ruin Russian car industry

The controversy around the situation with the Russian car industry is still going on. The conception of the industry’s development outlined the future of the car production, but the latest session at the Kama Automobile Factory (known as KamAZ) might turn out to be rather significant for the production of trucks, both in Russia and in the countries of the Commonwealth of Independent States.

On June 26 Mikhail Kasyanov, the Prime Minister of the Russian government announced about a possibility to restrict the production of Euro-0 machinery, which was likely to come into effect from October 1st. Three weeks passed by, but the State Secretary of the Unified State of Russia and Belarus set out his certitude of the fact that it was KamAZ that initiated the economic integration of Russia and Belarus, and that Minsk Automobile Factory (known for its initials as MAZ) would produce car parts together with KamAZ. It was also added that Belarussian trucks would be completed only with KamAZ Euro-1 engines.

The new management team that took over KamAZ with General Director Sergey Korogin at the head, which was marked with the activation of the marketing policy of the enterprise. KamAZ’s production capacity is 150-200 thousand engines, but the company manufactures only 40 thousand engines currently – this is the consumer demand. The Belarussian company MAZ takes a very big part on the market of heavy haulers production together with the automobile company Ural and some other smaller enterprises. So, KamAZ’s goal now is to press its competitors.

KamAZ did not declare any war, but it is acting with the help of rather aggressive methods, using dumping everywhere. Conducting negotiations with the Belarussian company regarding the delivery of its production, KamAZ offered Euro-1 engines to the company at the price of 105 thousand rubles per one engine. The prime cost of this engine at KamAZ is 160 thousand rubles. KamAZ decided to use the political lobby for its commercial needs.

The State Standard department of Russia will institute the restriction on the production of Euro-0 engines from October 1, clarifying this fact as the need to catch up with Europe and to take care about the environment in Russia. They did not mention, though, that Europe starts using Euro-3 engines.

Catching up with Europe is a good thing, but why being in such a hurry? Production plans of all enterprises are drawn up on the base of the Euro-0 machinery index for the current year. So, what’s the point of a knight’s move on the part of the state?

It is not about the fact that only KamAZ can produce Euro-1 engines, other enterprises are ready to do it even tomorrow, but this will require totally new contracts with customers. If the mentioned restriction is instituted from October 1, then the work of tens of factories both in Russia, Ukraine and Belarus will be paralyzed. Then there is a question coming up: why does the Russian government and Premier Kasyanov need all that?

We have to acknowledge that KamAZ is in the privileged position. It uses tax benefits, it received a Japanese loan in the sum of $150 million and bought up-to-date equipment for production of up-to-date engines. The company can afford to sell its production at dumping prices or even for free. Well, everything should be divided in portions, smaller companies will come in handy for Russia too. It is obvious now that MAZ is negotiating with KamAZ on the subject of Euro-1 engines just because of the fact that it is cheaper than others.

If the government institutes restrictions on October 1, then the company AutoDiesel of the city of Yaroslavl, for example, will suffer losses in the sum of 2.5 billion rubles, the state treasury will lose over 500 million of taxes. Well, they say that it is useless to criticize the state.

Yegor Mandratov PRAVDA.Ru

Translated by Dmitry Sudakov

On the photo: KamAZ truck