Russia gives green light to scrapping fee

Russia – The Russian Federation Council has approved laws introducing a car scrapping fee for both domestic car producers and importers. Due to come into force on September 1, the fee is seen as a step towards expanding fragmentising capacity to handle end-of-life vehicles.

The size of the fee has yet to be decided but the Ministry of Industry and Trade has suggested a base charge of 20 000 rubles per vehicle (US$ 624) multiplied by a number relating to engine capacity and ease of reclaiming the metal content. It has been rumoured that the fee will be higher for foreign-made cars.

It is believed the fee could generate US$ 4 billion per year for the state budget if car sales reach 2.6 million units (based on the forecast for 2012). Revenues should cover the construction of additional shredding capacity, although it is not yet clear how exactly the collected money will be used to finance scrapping and whether the new policy will be genuinely helpful in establishing car shredding enterprises, according to PricewaterhouseCoopers (PwC).

If Russia were to approach the European rate of car scrapping, this would mean a requirement for at least 20 scrapping plants, each with a maximum processing capacity of 100 000 cars per annum – or the construction of 14 new plants given that Russia already has six in operation. However, the capabilities of the existing facilities are questionable, according to PwC.

The average age of a car in Russia is currently 15 years as half of the nation’€™s car stock is 10 years old or older, which means scrapping rates could accelerate to 3 million per year during the next 10 years, potentially taking shredded scrap production to 1.8 million tonnes per annum.

Over the past decade, domestic car sales in Russia have surged from 1 million vehicles in 2002 to 2.5 million in 2011. An average of 1.8 million cars entered the market annually between 2003 and 2011. The national fleet grew by just over half to 35.5 million last year and a total of 3.4 million cars have been taken out of service in the past decade, according to Russian analyst Autostat.

Given that no organisation is monitoring car scrapping in Russia, it is not known how many of these vehicles were scrapped and recycled, and how many were simply abandoned. But according to PwC, the number of scrapped cars is likely to be low because Russia has few plants specialising in car scrapping and no system to make scrapping obligatory.

For more information, visit: www.pwc.com and www.eng.autostat.ru