Russian Clean Car Import Quotas Risk EV Take-Up

In the past month, the Russian government allowed some fragments of its green transport strategy 2030 to go public.

Minister of industry and trade Denis Manturov said at the Deutsch-Russisches Rohstoff-Forum: “To phase out fossil fuel vehicles in a smooth and gradual manner, we’re planning to introduce clean vehicle sales quotas for automakers due 2030, including hydrogen, battery-electric and natural gas fueled vehicles. To make it faster, we’ll initiate financial incentives to reject use of energy consuming technologies and dirty grey resources. Thus, Russia has embraced the ‘green turn’.”

Following his statement, business news site Commersant revealed citations from the government’s incumbent papers shedding some light on the part considering BEVs. Owners will be offered vehicle tax refunds and parking benefits. It further allocates 150Bn rubles ($2Bn) in governmental support of deploying 150,000 charging points by the end of this decade. For natural gas vehicles, the government will spend 32Bn rubles ($420M) on the gas charging network. An independent forecast by natural gas producer Gazprom suggests that one in three long-haul trucks and buses will run on LNG by 2030.

It is also known that the government has been working on a hydrogen transport plan since mid-2020, asserting production of hydrogen fuel due 2024. Meanwhile, biofuel is missing on the list of supported alternatives.

Anti imports

The strategy 2030 will pursue national manufacturing of alternative energy vehicles and components and put barriers before imported goods. In his speech, Manturov pointed out that Russia: “Will harmonize environmental and manufacturing development goals. It’s important that the transition to clean transportation will be done via the domestic supply of key components such as fuel cells and Li-Ion batteries.” He then called the global automakers to launch production of clean vehicles in Russia.

The policies favorable to local production can be put in action as soon as 2022. The Eurasian Economic Union is now considering to return the 15% tax on import of BEVs. Should the measure pass, it will be for the third time in seven years that Russia nullifies the tax and goes back on it shortly after. At the same time, the strategy envisions an eyebrow-raising leap of EV share in new vehicles sales from the current 0.1% to 1.7% as soon as the next year, a seventeen-fold growth, to reach 15% in 2030.

The “green zigzag” plan was criticized by the Association of European Businesses, an organization supporting foreign investors in Russia. In a comment under the draft, submitted by AEB to the EAEU web site, it argues that overly early hurdles for imported clean vehicles would hinder customer demand and charging infrastructure deployment. Downstream, it would haunt the national automakers’ EV production plans. “The proposed measures contradict with the EAEU member states’ policies of support and development of EVs and add to higher barriers for development of electric transport,” the letter states.

The measure could also restrain growth because of poorer choice of clean vehicles. In one instance, Nissan Manufacturing Rus has said it might row back on an earlier pledge to sell in Russia its new battery-electric Nissan Ariya.

Automaker frustration

The reaction from the national automakers was uncertainty. While demonstrating high levels of preparedness for production of greener vehicles, they are uncertain on roll-out time frames.

“We do not see an economically justified demand for electric cars in the mass market,” emailed Sergey Ilinskiy, communications director at Avtovaz. “At the same time, Avtovaz as a part of Renault Group has access to all the necessary technologies and is able to quickly roll out new models if there is a sufficient demand. Avtovaz is also the only passenger car manufacturer in Russia that produces two bi-fuel models of cars, the Lada Vesta and Lada Largus.”

Oleg Afanasyev, PR director at Kamaz, emailed that the company’s long-term strategy doesn’t assert target shares of gas, hydrogen and battery-powered vehicles. The automaker earlier claimed that it could start production of battery-electric trucks by 2023 and, a year later, battery-electric cars and hydrogen buses. The company is also the largest European producer of battery-electric transit buses.

However, Afanasiev cautiously noted: “That dates are either estimates or presumptions. The actual times of future EV production launches are under consideration. We will make the official announcements after they are defined and approved by the board of directors. I would like to note that all the mentioned products have already been developed as pre-production prototypes and testing is currently underway.”

“It should also be noted that the future launches are strongly tied with existence of sustained demand and readiness of infrastructure for wide-scale operation,” he further wrote. “In this regard, we actively collaborate with all market participants including governmental agencies to create the required conditions.”