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Meeting on developing automobile industry

June 16, 2022, St Petersburg

The President held a meeting to discuss the development of Russia's automobile industry.

The meeting was attended by Deputy Prime Minister Yury Borisov, Presidential Aide Maxim Oreshkin, Minister of Industry and Trade Denis Manturov, Minister of Economic Development Maxim Reshetnikov, Minister of Transport Vitaly Savelyev, Minister of Finance Anton Siluanov, Governor of the Central Bank Elvira Nabiullina, the heads of the Republic of Tatarstan, the Kaliningrad, Kaluga, Nizhny Novgorod, Samara and Tula regions and St Petersburg, General Director of KAMAZ Sergey Kogogin, General Director of Sollers Auto Nikolai Sobolev, AvtoVAZ President Maxim Sokolov and GAZ Group President Vadim Sorokin.

* * *

President of Russia Vladimir Putin: Colleagues,

Today our agenda includes the situation in the domestic automobile industry. We talk about it in one way or another all the time; today we will talk about it in a substantive way. Together with company directors and CEOs, we will see what difficulties Russian car manufacturers, car dealers and service centres are facing; we will discuss possible support measures for the industry and our further actions, given the situation today.

I would like to point out that the car industry is traditionally tied to many related industries, related sectors of the economy, including the metals industry, chemicals, light industry and electronic equipment production.

A number of contractors and suppliers were and still are located abroad, and this is not a peculiarity of our car industry only: this wide-spread cooperation and these long cross-border production chains are common world practice today.

Due to well-known circumstances and reasons, many of these ties have now been cut. Many of the Russian car industry’s partners, despite their long-term commitments, have either suspended deliveries or have announced withdrawals from our market.

Obviously, this demarche will have an impact on production output, and a noticeable one at that. This can already be seen – compared to a year earlier, in March, the domestic car industry output was three times lower, and in April it was five times lower.

I would like to stress once again that the situation is not easy. You are well aware of this and understand it. I would like to ask the Government to elaborate on the operational measures proposed to support the automobile industry and stabilise the domestic market.

At present, I consider two tasks the most important.

The first one is to ensure the operation of car-making factories in Russia, supply them with necessary components, preserve jobs and teams of qualified specialists.

In this context, I would like to recall that we have been implementing special import substitution programmes since 2014. I hope to hear today about the progress of work in this area.

That said, I will repeat what we discussed at the previous sectoral meetings: obviously, we cannot focus only on the current problems of the automobile industry. Today, it is particularly important to develop strategic approaches to its growth and to set a long-term trajectory of technological and production changes that are based on people’s need for high-quality affordable cars, the demands of the economy, businesses, the municipal economy for vehicles, including road, construction and utility equipment.

It is also necessary to work towards ensuring Russia’s technological sovereignty. Of course, this does not mean that all production processes in car-making must take place only here, in this country. However, key, critical elements, such as engineering designs, intellectual rights and know-hows, must certainly be Russian.

The second task is to saturate our market, to provide a sufficient supply of vehicles, primarily cars, the prices for which have soared this year.

I would like to recall that about a million and a half cars were sold in Russia during each of the past two years. However, this year car sales went down by a substantial 51 percent in the first five months of the year. In the meantime, according to experts, the reduction in sales should not exceed 20–25 percent if we want to avoid a sharp price rise.

I would like to ask you to share your plans in this area – both as regards the delivery of new cars to dealers and customer support.

I would also like to mention an issue that is a big headache for our car owners. It concerns car maintenance. Will the warranty rights of car owners remain valid? Where will they take cars for maintenance, and what is the status of spare parts supplies and the like? Let us discuss this issue today separately as well.

I have another point to make. While the main challenge for the car market is limited supply, the commercial vehicle market may face low demand.

Their main consumer is business and transport companies. Many of them have put their investment programmes on hold and are busy analysing the current market and logistics chains, including the ban imposed on Russian trucks to enter Europe.

In this regard, I propose taking a broader look at various programmes to support demand for commercial vehicles. It goes without saying that their efficiency must be improved.

An important remark in this regard. I am aware that Russian truck factories are realigning their production chains. Russian engine builders are replacing the suppliers that dropped out. Admittedly, for now, this replacement involves a decrease in the engines’environmental compliance class, which is more than a matter of environmental concernfor our urban areas and the regions, since it is also a factor of competitiveness.

You are aware of what I am talking about, but still, I would like to note that even friendly countries, our Eurasian integration partners,set stringent environmental requirements for trucks. If we lower the environmental class of Russian trucks en masse, this could affect the market position of our carriers. They will simply be denied entry, which means that drivers will face employment issues.

I would like the meeting participants to give their assessment of whether this is a system-wide problem and whether we need to adopt a special plan here.

Last, at a recent meeting on transport industry, we discussed plans for developing roads and related infrastructure, including expanding the core network of highways in the constituent entities of the Federation. They connect regional and district centres, towns and villages, and are used on a daily basis. We agreed that we would bring at least 85 percent of the regions’ roads, which are part of the core network, up to code over the next five years, something we must do no matter what.

In the context of our meeting, I would like to note that it is important to understand not only what the roads will be like in terms of pavement quality and safety, but also what kind of transport will be using them, what kind of vehicles passengers will be using for their commuting needs, and what kind of cargo will be transported.

In this regard, I would like to remind you of the instruction issued late last year which concerns upgrading the mass transit fleet in the regions, including trolleybuses and buses that service urban and suburban routes. I would like you to tell us how these plans will be implemented taking into account the current and future situation in the domestic auto industry.

Let's get to work and start the discussion.


Vladimir Putin: Let us summarise some results.

What would I like to single out?

First, everything is clear – I will not talk about the importance of the industry. Every job here, I think, supports seven jobs in other sectors. Mr Borisov here is saying nine. Nine even, and that in itself speaks volumes about the importance of the industry. I am not even talking about its direct significance. Therefore, I ask the Government to draft and approve an updated development strategy for the automotive industry by September 1, taking into account current realities. And of course, the key element of that strategy should be for Russia to have its own critical technologies and production facilities, and their level should ensure the global competitiveness of our industry as a whole.

Second. Today, manufacturers – my colleagues are sitting opposite me – spoke about the most pressing problems that limit their capabilities. First of all, it has to do with the supply of components. Of course, special attention needs to be paid to this. I will not go into detail now, there are a lot of details. Some problematic issues have been voiced, not all, but they have been voiced. This year, before the end of the year, everything must be done to prevent the situation from becoming extreme, critically urgent.

Third. The passenger car market needs special attention now, of course, because there is a shortage of supply and prices have gone up sharply.

I would also like to hear the thoughts of the finance minister – after all, metal prices are falling, the exchange rate has changed and it should certainly affect prices. I am not talking now about the other components pushing prices up – probably here we can also take some steps in the direction we need and, most importantly, in the direction people need.

We need to ensure the affordability of passenger cars for citizens, and I ask the Minister of Industry to also look into this carefully, including with colleagues from our other departments – government agencies, of course, first and foremost.

Let us come back to this again in the autumn, look at everything we draw up today in the form of instructions and see how it all works.

Next, our colleagues also mentioned the demand for commercial vehicles, which, I agree, is critically important for the economy. I want you to focus on expanding the mass transit renewal programme. Representatives of the regions mentioned it as well. Actually, this makes sense. A reduction in the average age of the equipment must be the benchmark for improving the situation in this area.

I certainly agree with what was said about NGV fuel. Cheap raw materials are undoubtedly our competitive advantage.

Gazprom's efforts are not enough here. I would like our regional leaders to be aware of the fact that success in building filling stations largely depends on how this work is organised in the regions. Building a network is extremely important. If there is a network, there will be demand for the equipment; if no network is available, how are they going to fill their tanks? This is a key element. The situation in the automotive industry will then change overnight, because, as someone aptly noted, the level of environmental friendliness will immediately change and higher competitiveness in the business of hauling cargo that is bound by environmental regulations will follow. That way, our transport will face no restrictions.

In closing, I would like to once again draw your attention to the fact that every decision that we make must be acted upon as quickly as possible without unnecessary red tape. Our colleagues from the industry have already extended their gratitude to the Government for making decisions faster, but we must work even faster and more efficiently given the circumstances.

Most importantly, the scientific and technological progress of the industry is hands-down the key component and should be prioritised. Science, technology, and engineering centres are what we should engage in. In that case, our independence will be absolutely real and rely on a strong foundation of its own.

Thank you very much. We will draft a resolution following our meeting today, and I hope it will be acted upon swiftly and effectively.

Thank you.

June 16, 2022, St Petersburg