Industrial Policy, Moscow Style: Invest Here, Or Else

Bertel Schmitt
by Bertel Schmitt

Mr. Putin must be reading TTAC. B arely did we report that the Russian market is coming back to life, Vladimir Putin stepped in front of the cameras in Moscow, and announced killer measures to put the Russian auto market back into its place.

In a speech today, Putin announced that import tariffs for new cars will be increased “step by step.” He didn’t mention any numbers or dates, but the buyers of that Mulsanne better hurry. And it’s not that importing cars to Russia is particularly cheap right now. Currently, there is a 30 percent import duty on any new car. Smug Vladimir said that Russia is not part of the WTO, so they can put their import duties as high as they damn please.

Thinking of selling used Cadillacs to Russia instead? Better think again. Cars older that 5 have been slapped with an import duty between €3 and €5.70 per cubic centimeter displacement. Let’s see. A 5 year old 6 liter Escalade would cost $44,460 in import duty alone. Makes a new one look like a bargain. And that’s exactly what Putin has in mind.

“Moscow wants to force foreign auto makers to open their own plants in Russia,” says Automobilwoche [sub].

And they better bring the very latest technology, or Vladimir will have serious issues with them. He will not tolerate that foreigners “flood our market with garbage, and turn our country into a scrap heap for outdated technology.”

The Russian market must be doing really well for investor to put up with these shenanigans.

And just in case you are wondering why Russia needs new technology, have a look at the former Moskvich factory.

PS: One company already got the message: The manufacturer that is owned by that other government. The Moscow Times reports that “General Motors may need to double production capacity in Russia to meet demand and is in talks with potential partners, including billionaire Oleg Deripaska’s GAZ Group.” GM currently has capacity to make 180,000 cars in Russia. Deripaska – wasn’t her the ugly Russian GM didn’t want to trust with Opel’s precious trade secrets? Wasn’t he the guy GM contacted immediately after the deal broke up? Yep, the same guy who had to cut a deal with the FBI to get his U.S. visa back. The very same.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

More by Bertel Schmitt

Comments
Join the conversation
3 of 27 comments
  • Rday Rday on Aug 30, 2010

    Whenever you deal with a dictatorship, you are always subject to the whims of the dictator. IMO it is best to stay away from Russia unless you are Russian. A foreigner will never get a fair shake there.

    • Psarhjinian Psarhjinian on Aug 30, 2010

      Russia is not a dictatorship, it's an oligarchy. To be honest, most states are to varying degrees, but in some it's it's much, much more outré than others. It's not an issue of being foreign or not. That's just an excuse; a post-facto justification. What matters is that you already have money, and thusly power. Foreigners generally don't have as much money, or haven't had the time to use money to acquire influence, but it's not because they're not Russian, it's because they didn't get in on the ground floor. Race is often used to justify all sorts of nastiness, but it's important to understand that race issues are, most often, actually class or economic issues. It's also worth noting that when you address economic issues, racial or cultural issues seem to magically disappear. This should make you think about the income polarization we're seeing in the West, and where it may eventually lead.

  • M 1 M 1 on Aug 30, 2010

    For the moment, anyway, it's still possible to import used vehicles through certain other countries and avoid the extra-high Russian tariffs, although the 5-year rule still applies (to the day!).

  • Tassos NEVER. All season tires are perfectly adequate here in the Snowbelt MI. EVEN if none of my cars have FWD or AWD or 4WD but the most challenging of all, RWD, as all REAL cars should.
  • Gray Here in Washington state they want to pass a law dictating what tires you can buy or not. They want to push economy tires in a northern state full of rain and snow. Everything in my driveway wears all terrains. I'm not giving that up for an up to 3 percent difference.
  • 1995 SC I remember when Elon could do no wrong. Then we learned his politics and he can now do no right. And we is SpaceX always left out of his list of companies?
  • Steve Biro I’ll try one of these Tesla driverless taxis after Elon takes one to and from work each and every day for five years. Either he’ll prove to me they are safe… or he’ll be dead. Think he’ll be willing to try it?
  • Theflyersfan After the first hard frost or freeze - if the 10 day forecast looks like winter is coming - that's when the winter tires go on. You can call me a convert to the summer performance tire and winter tire car owner. I like the feel of the tires that are meant to be used in that season, and winter tires make all of the difference in snowy conditions. Plus, how many crazy expensive Porsches and Land Rovers do we see crashed out after the first snow because there's a chance that the owner still kept their summer tires on. "But...but...but I have all wheel drive!!!" Yes, so all four tires that now have zero grip can move in unison together.
Next