Russia plans massive tax increase on imported cars from 2025

Russia plans to significantly increase taxes on imported cars from 2025 by doubling scrapping fees for all carmakers, while increasing government support for locally manufactured vehicles. This emerges from budget drafts published on Monday. Moscow’s invasion of Ukraine in February 2022 drastically changed the Russian automotive market; Western carmakers have left the country while Chinese manufacturers have stepped in to fill the production gap. According to the budget proposals, Russia expects its revenue from car recycling to almost double in 2025, rising to 2.01 trillion rubles, compared to 1.08 trillion rubles last year. Scrapping fees for imported vehicles are expected to rise to 1.14 trillion rubles next year, compared to 680 billion rubles this year. For Russian-made cars, fees will rise from almost 400 billion rubles to 871.5 billion rubles. In Russia, both domestic manufacturers and car importers are required to pay a scrapping fee to cover the state’s future costs of waste management. However, these higher costs will be offset by increased subsidies for locally manufactured cars, “to offset part of the cost of production,” according to the budget proposal. This could result in imported cars becoming relatively more expensive, forcing Chinese automakers to shift some of their production to Russia to remain competitive. Domestic automobile production in Russia fell to a post-Soviet low in 2022 as Western automakers that had factories there abruptly ceased operations and ultimately left the country.