1、Buy a car within 12 months

2、The number of vehicles purchased is greater than or equal to two

Russian salvage charges soar: Will cars go up again?

The government intends to increase the recycling rate for imported cars from August 1, 2023. The new rates set out in a government decree dated July 7 are effective immediately. While some experts have called increased waste collection a new tax on the rich, others are convinced the government's decision will help crack down on "grey schemes" of parallel imports. Still others believe that collection will have little impact on the cost of a new car. We find out who pays more and how much.

Why Are Recycling Rates Going Up?

The change in recycling rates is linked to the government's decision to build a financial "buffer" for the domestic auto industry. Industry and Trade Minister Denis Manturov announced a week ago that half of the funds raised will go to state support for the industry, including a preferential car loan scheme this year and next. Authorities are concerned that the policy change will not have any impact on Russian-made cars, a way the government hopes to incentivize Russians to buy domestic vehicles.

Who will pay more?

Legal entities have always had higher royalties than individuals. If an individual buys a car through SBKTS at a price of 3400 rubles for a new car and 5200 rubles for a three-year-old or older car, the company will pay hundreds of thousands of rubles for the same car, depending on the amount the size of its engine.

According to the new rates, the cost of recycling cars for legal entities will increase significantly from 178.4 rubles to 300,000 rubles for internal combustion engine vehicles up to 2 liters; 281.6 to 844 thousand rubles for 2 to 3 liter engines, and 326 to 360 thousand rubles for electric vehicles. The most serious increase will affect engines with a displacement of 3 liters and above. In this case, the amount of the recovery fee is RUB 970,000 (the previous maximum was RUB 445,000).

A very important point is the restriction on individuals who import cars for resale. If a citizen imports a registered car by himself, he shall pay a disposal fee at the personal rate. But if he decides to sell the car within three years, then he will have to pay the legal entity rate.

What will happen to the parallel import program

The new processing fee will hit parallel imports the hardest. Brokers and their companies bring and arrange cars for private traders to sell to dealers or customers. It will no longer be possible to provide a car with a complete set of documents to private individuals.

Experts predict that no one has imported cars directly to Russia for a long time. Therefore, dealers and brokers will invent various schemes with Kyrgyzstan and Belarus that will reduce customs costs and register cars for local residents, then resell and register the title to the final owner. The decision on new tariffs will not lead to saturation of the Russian car market. Because the price of all cars entering the country will increase, which will lead to shortages and higher prices of Russian cars. At the same time, experts are not waiting for Chinese brands to start localizing cars in Russia, because Chinese manufacturers see that the market is solvent and consumers are ready to pay.

How Scrapping Affects the Price of a New Car

Representatives of large dealers responded calmly to the news of the increase in recycling fees. In the formation of the final price of a car, it is not the scrapping fee that plays a more important role, but the exchange rate and inflation. And the upcoming price increase will also be closely related to this.

The increase in scrapping fees will have no real impact on legal parallel imports. After all, the move is designed to ensure the car isn't resold for three years, in which case recycling costs would be higher. Experts link the expected decline in sales to a general increase in prices.

Demand will shift to Chinese-made cars, as people who are used to driving new cars will buy them, even if they have to switch brands. In addition, the formation of the second-hand car market is based on the sales of new cars, that is, the more domestic cars officially delivered in the country, the more second-hand cars will be on the secondary market. At the same time, the pent-up demand for previously familiar vehicles in the auto market will also increase as the country returns to its previous vehicle supply situation.