In Soviet Russia, Car Clunk You

The latest fad in America has been the CARS rebate, or Cash for Clunkers. I think that the basic idea behind the program is fantastic, stimulate a downtrodden part of the economy in hopes of finding that silver lining. I do, however, also think that it quite hilariously rewards everyone who bought a gas guzzling behemoth by offering them money in hopes they’ll buy something new. I know this, no one offered me any dollars for my 98 Toyota Crapolla.

Anywho, Russia is looking to implement the same kind of program next year to encourage an economic shift towards Mother Russia’s own factories. The Industry and Trade Ministry plans to pay 50,000 rubles (about $1,500) to anyone trading in a vehicle 10 years or older towards the purchase of a Russian-made auto. Unfortunately, there is a concern that they will be unable to proceed with a successful recycling program, as the country’s scrap industry is unregulated and many cars are simply abandoned in the yards. Also, in standard Ruski practice, the design of their older cars makes them more difficult to recycle. At present, about half of the entire Russian automotive fleet is more than ten years old and about 400,000 cars registered with their traffic police have been abandoned or dismantled. Roughly 7% of Russia’s 30 million cars become “clunkers” annually, but no previous attempts have been made to recycle them after having removed any useful spare parts.

Why should this matter to us? Just as Americans have used the CARS program to exchange their Ford Explorers for Toyota Corollas and Camrys, Russian’s seem quite fond of US autos. According to CNNMoney, companies such as Ford and General Motors stand to benefit from the legislation as they have significant manufacturing operations there. Unfortunately, the program may not boost Russia’s auto industry significantly enough, assuming that consumers will only purchase cars sold for less than the 50,000 ruble incentive. The trade-in program “will lend no strong support to the industry as a whole, but could contribute to growth in car sales at Avtovaz, the maker of Russia’s cheapest cars,” said Konstantin Romanov, analyst at Finam Investment Company. “According to our estimates, such cars are mostly owned by people who would be able to buy only the cheapest new car. Similar programs have been enacted in Germany, France, Italy and Spain have encouraged increased car sales, with policy-makers emphasizing the environmental benefits of more energy-efficient vehicles. According to MarketWatch, the Moscow-based Association of European Businesses reports that new car sales in Russia fell by 58 percent in July, compared with the same period a year ago.

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