Russia is anticipating a significant shortfall in revenue from car scrappage fees this year, a key source of funding for various state projects. Finance Minister Anton Siluanov recently revealed that actual receipts are falling well below the levels projected in the federal budget, raising concerns about the potential delay or cancellation of government programs reliant on those funds.
The scrappage fee, a levy imposed on both domestic automakers and car importers, is intended to finance the eventual disposal and recycling of vehicles. In 2025, Russia aimed to nearly double its earnings from this fee, projecting an increase from 1.08 trillion roubles to 2.01 trillion roubles (approximately $24.77 billion). However, this ambitious target now seems increasingly unlikely due to a weaker-than-expected performance in the car market.
A significant factor contributing to this shortfall is the decline in new car sales. According to Russia’s Ministry of Industry and Trade, only 404,016 new cars were sold between January and April of this year, marking a 27% drop compared to the same period last year. This decline directly affects the amount collected through scrappage fees, as fewer vehicles sold mean fewer fees paid into the system.
Compounding the issue is the current dominance of Chinese automakers in the Russian car market. Following the exodus of many Western and Japanese car brands due to international sanctions and economic uncertainty, Chinese brands have rapidly expanded their footprint. In response, Moscow has sought to reassert control over the market by increasing taxes on imported vehicles through higher scrappage fees and simultaneously boosting state support for domestic manufacturers.
The dual strategy of raising import fees and supporting local production was intended to stabilize and eventually revive the domestic car industry. However, with car sales faltering, the financial underpinnings of that strategy are now in question. The reduced income from scrappage fees not only jeopardizes plans for future automotive sector investments but also casts doubt on broader infrastructure and industrial projects that were to be funded through these revenues.
Siluanov noted that the shortfall was already evident, although he did not provide precise figures. He warned that if revenue from scrappage fees continues to fall short, the government might be forced to scale back or completely abandon certain projects that rely on this funding.
Russia’s attempt to revitalize its automotive industry and raise additional revenue through increased scrappage fees is facing serious challenges. Plummeting car sales, shifting market dynamics, and heavy reliance on imported vehicles, despite protectionist measures, have all contributed to a fiscal gap. As a result, the government may have to revisit its plans and adjust its expectations for both revenue collection and expenditure in the near term.
Source www.reuters.com
