A powerful incentive: how recycling is changing the Russian market

The indexation of recycling has become a catalyst for structural changes in the automotive industry. Criticism of this measure does not take into account the positive impact on car production in Russia and their localization, experts and market players say. The consumer also benefits, they are sure, as the new recycling rules will allow for the formation of a transparent automotive market in Russia. Details can be found in the Izvestia article.

"They create clear economic signals"

The departure of international brands from Russia has created a "window of opportunity" for domestic manufacturers, said Andrey Reznikov, managing partner of DF-Trading, a manufacturer and distributor of electric vehicles and hybrids under the brands Evolute and Voyah. Therefore, the increase in recycling is not just protectionism on the Chinese or Japanese model.

"This is, first of all, a measure to protect economic sovereignty, designed to stop the flow of capital into the economies of countries applying sanctions regimes and give the domestic automotive industry the opportunity to become truly competitive,— Andrey Reznikov told Izvestia.

The current proposals of the Ministry of Industry and Trade for further indexation of recycling are a balanced compromise. They do not prohibit, but they create clear economic signals. For the consumer, it means that buying a car from an unfriendly jurisdiction becomes less attractive. For the market, it means that an environment is being formed where manufacturers who directly invest in Russian industry and create added value here gain an advantage, Reznikov believes

There was no serious price increase

Critics do not take into account the complex of positive effects for the entire car business and for hundreds of thousands of ordinary car owners, Reznikov is sure.

Despite the increase in the recycling fee from October 1, 2024 and its subsequent indexation from January 1, 2025, there was no significant increase in retail prices. Moreover, taking into account inflation, they have decreased, Andrey Reznikov notes. He sees the reasons for this in the high competition between automakers for market share, brand price wars and significant inventories of imported cars in 2024. Attempts by individual players to revise the price tags upward immediately led to a drop in sales, forcing companies to offer discounts, often close to the cost of the car.

According to the data of the analytical agency Autostat, cars began to actively rise in price only in September — an increase of only 6% compared to last year, and 4% compared to last month. Inflation in the Russian Federation in the same period was 8.4%.

With the new recycling rates, owners of used hybrids or powerful premium models will receive a sharp increase in their market value, Reznikov believes.

— The scrap fee that was once paid is capitalized in the price of the car. With the introduction of new rates, cars already in circulation will rise in price in proportion to the difference between the old and new fees. For example, a used hybrid or crossover costs 4 million rubles today. With the new rates, its price may increase by 50-70% of the amount of the new fee. The owner will receive an additional 700 thousand, or even 2 million rubles upon sale. And then this money can be used to buy a new car, the production of which is localized in Russia. Recycling for such cars is compensated to the manufacturer, and in conditions of competition and surplus capacity of car factories, prices are not expected to rise," notes Andrey Reznikov.

Thus, the expert says, there is a powerful incentive to upgrade the entire fleet in Russia.

Despite stable prices for the end customer for nine months, the budget received significant additional revenues: 56 billion rubles — an increase due to an increase in rates in Q4 2024, and 73 billion rubles — additional revenues in 2025 after indexation in January 2025.

Accelerated the transition to localization

At the same time, the price ceiling that has formed in each segment has led many importers to losses and accelerated the transition to localization of production at vacant facilities in the Russian Federation.

If for 9 months of 2021 foreign brands produced 650 thousand cars in the territory of the Russian Federation, then for the same period in 2023 — only 125 thousand units. In 2024, over the same period, production at already restarted car factories increased to 150,000 vehicles. At the same time, the import of ready-made vehicles provided a serious boost to the Russian market. In three quarters, car production in Russia increased to 250,000 units. At the same time, the market itself has shrunk by 21% by 2024.

In particular, production in the segment of vehicles powered by new energy NEV has soared. If about 1,500 electric vehicles and hybrids were produced in the first 9 months of 2024, then in the first 9 months of this year their output was almost 6,000 units, with most of them coming from the Voyah and Evolute models.

"Customers win"

The phased increase in recycling was also supported by other leading players in the domestic automotive industry — AvtoVAZ, Sollers, KamAZ, and Moskvich. AvtoVAZ believes that these steps will have a positive impact on the development of the domestic automotive industry and related industries, as well as make prices for Russian-made cars stable and predictable.

Alexey Kalitsev, CEO of AGR Holding, said that the indexation of scrap collection would make it possible to "whitewash" the Russian automotive market, and local production could close the needs that parallel imports had previously satisfied.

In turn, Denis Pak, president of Avtotor Holding, added that the initiative creates "a balance between the interests of consumers and producers."

The new rules will not lead to shock scenarios, Svetlana Vinogradova, CEO of Rolf Group, is convinced.

— First of all, customers benefit, because almost the entire flow of cars, including parallel imports, will go through professional players. This means that the Law on Consumer Protection will apply to any transactions, and customers will receive full guarantees for key components and assemblies of the car. In the "gray" schemes, the role of the intermediary is actually reduced only to importing the car into the country, without any quality obligations and without guarantees for the client. This model makes it possible to bypass commercial recycling at the expense of preferential tariffs, leaving the consumer unprotected, and the state without part of the tax revenue," she noted.

According to Svetlana Vinogradova, everyone benefits from the new scheme: customers receive security and guarantees, and the state receives additional income and a transparent market.

According to Rolf, the most sought—after models in 2025 are Haval Jolion, Chery Tiggo 7 and Geely Monjaro. For most of them, the price changes will be minimal. More noticeable changes are possible in the segment of electric vehicles and hybrids. However, the share of this area today does not exceed 4% of the total Russian market.

Import costs

According to Dmitry Morkovkin, Associate Professor of the Department of Taxes and Tax Administration at the Financial University under the Government of the Russian Federation, Candidate of Economics, the key task of the Ministry of Industry and Trade is the implementation of protectionist protective measures of domestic manufacturers and the development of car production in the country. At the same time, we should not expect any major changes on the part of buyers now.

"There may be some revival in the market, but no one will rush to buy up existing cars, since the market was previously oversaturated with Chinese cars imported to the Russian market back in 2023-24," the expert notes.

The October indexation of recycling in 2024 and phased indexation in subsequent years increased costs primarily for imports by 70-85%, while for local assembly projects the effect was smoothed out by subsidies and the general perimeter of state support, Vladimir Chernov, analyst at Freedom Finance Global, told Izvestia.

— An additional driver is the announcement of a modified recycling calculation methodology in 2025, including capacity reference, which encourages the revision of the line and configurations for the local market. This reinforces the trend towards localization and compression of gray schemes," says Vladimir Chernov.

The new mechanics in the calculation of recycling will give an impetus to the further development of the domestic automotive industry and increase its competitiveness, said Olga Korchagina, a leading specialist at the office of the Trade Union of the AFM of the Russian Federation.

— For those players who are successfully restoring production at the sites of bygone brands, clear conditions are being created for investments in technology, deepening the localization of products, including in those segments whose production in Russia is still at the initial stage of development. This is important for the long—term development of such projects," Olga Korchagina said.