Vehicle scrapping fee increase will not push up prices for Avtovaz cars, CEO says

YEKATERINBURG. July 10 (Interfax) - The Russian government's decision to raise the scrapping fee for automobiles as of August 1 will not lead to an increase in prices for Avtovaz products, the leading Russian carmaker's CEO, Maxim Sokolov said.

"Issues regarding the announced decisions on raising the scrapping fee are being discussed. I can immediately assure everyone, both our potential customers and all those who are interested in Avtovaz products, [that] specifically this decision will in no way affect prices for Avtovaz's Russian products, because we have a high degree of localization of our product line here. And for many years already Avtovaz fully compensates the scrapping fee, so its increase in regard to directly imported or hidden imports of automobiles is neutral," Sokolov said at the Innoprom forum.

However, prices could be affected by the ruble's exchange rate against the dollar, which "in one way or another affects the factory-gate prices of our suppliers of components and various assemblies," Sokolov said.

Even if the company is dealing with Russian businesses, "to a large extent they get the sub-components, materials, raw materials from abroad," so the exchange rate has a "certain impact," he said, adding that the extent of this impact and its lag, in terms of signed contracts, needs to be analyzed at a specific time for specific models.

"But the fact that there will be this impact is certain. This is the reality of our economic life," Sokolov said. However, Avtovaz will try to "minimize this process," he added.

"This could be reflected in prices in the next few months already, when supplies of imported materials and feedstock at fixed prices end," Sokolov said.

Under a government resolution, scrapping fees for cars, light commercial vehicles (LCV), trucks and buses will be raised by 70% to 270% as of August 1 depending on the type of vehicle and size of engine. The increase will apply to new and used vehicles imported by businesses, but will not apply to individuals who import vehicles with up to three-liter engines for personal use.