Russia may ban car imports if West applies new sanctions - Vedomosti

Reuters

Will Russia ban western cars next?

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By Maria Kiselyova and Katya Golubkova

MOSCOW (Reuters) - Russia may tighten retaliatory sanctions against Western nations to include a ban on car imports, if the United States and the European Union impose additional sanctions on Moscow, daily newspaper Vedomosti reported on Monday.

The impact of the measure on many foreign automakers would be softened because their factories inside Russia would not be affected, but some high-end brands such as Daimler AG's (DAIGn.DE) Mercedes-Benz could be more vulnerable as their models have to be imported.

The West accuses Russia of arming separatist rebels in Ukraine, an allegation Moscow denies. Western governments imposed sanctions on Moscow, including on its financial and energy sectors, and Russia has already hit back by stopping imports of many food products.

Announcing the food bans on Aug. 7, Prime Minister Dmitry Medvedev said the government was also considering protective measures in aircraft, shipbuilding and automotive industries, without specifying the scope of any possible sanctions.

"We are seriously concerned. We hope that the Russian government will think twice before taking any such measures as they would hurt all manufacturers," Joerg Schreiber, chairman of the Association of European Businesses' Automobile Manufacturers Committee, told Reuters.

Schreiber said the impact of any sanctions would depend on their scope, such as whether the government banned imports of built cars or both cars and components, or raised import duties.

Vedomosti reported that a ban on vehicle imports had been among proposals put before Russian President Vladimir Putin, who rejected the idea and ordered a ban on food imports only. But it said car import restrictions remained an option in the event that Western nations extend sanctions on Russia.

Citing an unnamed government source, the paper said Russia may fully or partly ban imports of cars from countries which impose sanctions on Moscow, though it quoted another source saying the government had not yet been instructed to prepare the introduction of any new measures.

Russia's industry ministry had no immediate comment.

The article did not specify if the proposed ban would cover all imported vehicles, including trucks and buses as well as passenger cars.

Imports accounted for 27 percent of passenger car sales in the first half of 2014, while for trucks and buses the proportion was 46 percent and 13 percent respectively, it said.

LOCAL PRODUCTION

Foreign carmakers have invested at least $5 billion (3 billion pounds) in setting up local production in Russia since the mid-2000s. The government encouraged the trend by raising import duties on cars and lowering tariffs on parts.

U.S. automaker Ford Motor Co (F.N), Germany's Volkswagen AG (VOWG_p.DE), France's Renault SA (RENA.PA), Japan's Toyota Motor Corp and South Korea's Hyundai Motor Co are among those which produce locally.

Daimler has a joint venture with Russian truckmaker Kamaz OAO (KMAZ.MM) to assemble Mercedez-Benz trucks in Russia, but it does not make passenger cars in Russia.

The firm's saloons are heavily favoured by Russia's wealthy classes. According to the AEB Automobile Manufacturers Committee, sales of Mercedes-Benz cars in Russia stood at 44,376 in 2013, up 19 percent on 2012.

That accounts for just over 3 percent of global Mercedes-Benz car sales last year.

The other big luxury car brand in Russia, BMW (BMWG.DE), produced more than 20,000 cars in Russia's western enclave of Kaliningrad last year. It sold 44,871 BMWs and Minis in Russia in 2013.

BMW declined to comment on the Vedomosti report, as did Daimler, Volkswagen and German auto industry association VDA. Volkswagen, which imports cars into Russia as well as making VW brand and Skoda vehicles at its Kaluga factory, said only that it was closely monitoring the situation.

VW spent 1.3 billion euros between 2006 and 2013, mainly to set up an assembly plant in Russia. Further plans call for 1.2 billion euros in investments through 2018 to help it boost annual sales in the country by more than 60 percent to about 500,000 cars.

A ban on Western car imports could benefit Asian manufacturers, such as China's Great Wall Motor Co Ltd , Chery Automobile Co Ltd [CHERY.UL] and South Korea's SsangYong Motor Co Ltd .

Ukraine on Monday accused pro-Russian rebels of hitting a refugee convoy of buses with rocket fire near the eastern city of Luhansk, but the separatists denied responsibility.

(Additional reporting by Edward Taylor in Frankfurt, Andreas Cremer in Berlin and Irene Preisinger in Munich; Editing by Christian Lowe and David Holmes)

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