The government policy aimed at attracting foreign investments into the motor industry benefited end consumers, but were still insufficient for ensuring a comprehensive development and restructuring of the motor industry.
A significant impact on the dynamics of production was produced by the government program ‘The Experiment Designed to Promote the Acquisition of New Means of Automobile Transport in Return to Those Taken Out of Service and Submitted for Utilization’. The age structure of the existing motor car fleet is quite disadvantageous. The mean age of a motor car in Russia is 12 years, and vehicles aged less than 5 years constitute only 26 % of the car fleet, whereas in Europe and the USA the mean age of a motor car is 8.5 years. The per annum rate of withdrawal of old vehicles from the motor car fleet in Russia is 3 – 4 % against 6 – 7 % in developed countries. It should be admitted that utilization of vehicles – given the current changes in the situation on the domestic market, the rate of production and imports – will have only a short-term effect that will soon disappear if such measures are not sustained by a comprehensive strategy of long-term development of the motor car industry. It appears that the age structure of the motor car fleet can be changed more efficiently by measures aimed at promoting purchases of new vehicles, namely establishing a tax on motor cars depending on their ecological class; subsidizing those consumers who buy vehicles of a higher ecological class; increasing the cost of insurance for second-hand vehicles; introducing tougher requirements for mandatory technical checks, etc. A comparison of the domestic motor car industry with foreign practices can serve as an illustration of Russia’s significant lag in terms of production volume and investments in companies’ fixed assets, research and development, and labor productivity. The funding earmarked by Russian motor car producers to research and development does not exceed 1 % of their annual proceeds, whereas for the leading foreign Section 4.
The Real Sector of the Economy manufacturers these expenditures amount to 4 – 5 % or more of their annual turnover. This results in the development cycle of new car models in Russia being much longer that in the case of the world production leaders, and so the rate of renewal is much lower in the case of the former.
The loss of a significant market share has resulted not only from the low level of the domestic motor car technologies, but also from insufficient investments in the development of new platforms and models, from the limited number of models and options offered to the consumers. Russian companies have invested in the development of their industry a share of their proceeds that is 4 – 5 times less that that of their foreign competitors, which is the result of the inefficiency of the financial mechanisms available to them, including those designed to attract credits.
The insufficient competitive capacity of the domestic motor industry’s products is the outcome of low investments in fixed assets. This phenomenon can be explained, on the one hand, by the high cost and short terms of the available investment credits, which cannot be taken full advantage of because of the low rate of return on production (traditionally between 6 and 8 %) and companies’ solvency levels; and on the other, by insufficient motivation for the government to make investments in the motor car industry.
In order to achieve the long-term development goals for the motor car industry, substantial capital investments will be necessary in the following key areas:
- creation of new production capacities for manufacturing motor cars, their parts and engines, in order to satisfy the growing demand by domestic products;
- modernization and technological upgrading of the existing production capacities in order to bring them up to a competitive level in terms of efficiency, productivity and product quality;
- research and development aimed at creating new platforms and models, the components and equipment needed for the production of those models, as well as purchase of licenses and adaptation of global platforms within the framework of collaboration with international partners;
- financing of current capital needed for sustaining the forecasted growth of sales on the Russian market.
* * * Our analysis of the main macroeconomic trends has led to the following conclusion. Although in 2010 the Russian economy actually came out of the acute phase of the crisis, the unstable dynamics of the main macroeconomic indices, the slow exit from the crisis of the investment, financial and crediting sectors of the economy, and the complicated situation on the labor market are still imposing a system of restrictions to development in the short-term period.
The national economy continues to be dominated by the same factors that determined the speed and depth of its decline during the crisis and the insufficiently rapid elimination of the acute crisis phenomena: its dependence on changes in the world prices for Russia’s exported raw materials; low domestic demand and a lax attitude of domestic producers towards making interventions on the most promising markets for consumer, investment and intermediate commodities; and a weak financial system.
The creation of necessary economic conditions for the economy’s transition from the anticrisis mode to rehabilitative growth implies implementing a system of measures aimed at modernization of production capacities, enhancement of innovation activities, and improvement of the quality of human capital.
RUSSIAN ECONOMY IN trends and outlooks 4.2. Russian Industrial Enterprises in The section was prepared based on the materials of the surveys among managers of industrial enterprises, conducted by IEP in compliance with the European harmonized methodology monthly, from September 1992 and cover the entire territory of the Russian Federation.
The panel is about 1100 companies, which employ more than 15 per cent of the total employment in the industry. The panel is biased towards large enterprises in each of the subindustries. Feedback on questionnaires is 65-70 per cent.
Industrial surveys (IS) among business leaders is a quick way to gather information about the assessment of the situation in their enterprises and the expected (planned) changes in the key performance indicators of the enterprise. IS is a relatively new tool of economic analysis.
The first survey was conducted by IFO Institute (Munich, Germany) in 1949. Soon afterwards such polls have been held in Great Britain, France and Italy. Since 1962, the EU is making efforts to harmonize (make comparable) the surveys in the countries of the continent.
There is a rather small number of questions in the IS questionnaire (no more than 15-20).
The questions are of qualitative, rather than quantitative nature. Simple design of questions and answers allows the respondents to fill out the forms quickly and without involvement of other employees or any documentation. It is essential that the respondent in each enterprise should be the Manager of the top level, who has a complete Fig. of the situation at the enterprise and directly involved in the company management. In 2008 28 per cent of responses to the IS questionnaires were received from the Directors of enterprises, 37 per cent - from the Deputy Directors, 22 per cent - from the leaders of economic departments.
In analyzing the results of industrial surveys a specific derivative index is applied, known as balance. Balance is calculated as the difference between the percentage of respondents given the answer about their business standing as "increasing" (or "above regular" indicators) and the percentage of respondents whose assessment was as a "declining" (or "below regular"). The resulting difference allows to sort the answers to each question by one number with the sign "+" or "-“.
Balance is interpreted as the first derivative or the process rate. If the balance of answers to the question about the expected price change is with the sign "+", it means that the average prices in the near future will continue to grow (for example, there dominating the companies, reported on an expected increase in their prices). The increase of the balance within a month from +10 to +17 per cent means that average prices in the industry will grow more intensely as the increased prevalence of companies, predicting growth. A negative balance means a decrease in average prices (more companies are going to lower their prices). Changing the balance from -5 per cent to -12 per cent is interpreted as plans of the intensity of prices lowering.
4.2.1. First Quarter: an Attempt to Recover from Crisis In early 2010, Russian industry continued its recovery from the crisis. The dynamics of sales and estimates of the demand allowed businesses to maintain output growth and demand forecasts, backed up by the portfolio of orders, showed the formation of the most popular hopes for recovery from the crisis.
In January 2010, the demand for industrial production for the first time during the current crisis has ceased to decline: the share of reports on falling sales reached the level equal to the reported growth. However, the improvement of the dynamics of demand in comparison with quarter IV of 2009 was negligible and noticeable only to those that was close to zero. HereSection 4.
The Real Sector of the Economy with, the original data quite adequately reflected the nation-wide ten-day vacations, having demonstrated the decrease, which is not cleaned from seasonal factors balance by 8 points versus January level, recorded in 2002-2008. Thus, the January (2010) dynamics of the demand proved to be quite comparable to the pre-crisis level.
This thesis is confirmed by the indicators of satisfaction of the total demand. The share of normal ratings has increased immediately by 10 points and reached 42 per cent for the industry in general, which was the maximum peak over the months preceding the crisis (see Fig. at the end of this section). January 2010 was not such a disaster for the Russian industry, as one might expect is projected November - December 2009.
In January 2010, industrial production, as estimated by businesses, continued (after cleaning from seasonal factors) its growth with the same intensity. Thus, the surveys recorded the output growth over the past five months. The initial data (before treatment on the season) showed, of course, in January the decline in production, but it was the same as happened in January 2002-2008 and two point five times less than in January 2009. In other words, the dynamics of output began to come back to normal after the level of demand.
Production plans of enterprises at the beginning of the year have been improved as compared with the plans, registered in December, by 52 points at a time. Such a sharp rise in optimism has not been mentioned even once in the original surveys over 1992-2010. Clearance from seasonal factors significantly adjusted growth of this indicator (up to 10 points), but the result was still decent (it gave way to Crisis maximum only by 1 percentage point).
The growth of optimism in the plans of production output had quite certain grounds in the industry. According to the companies, the new year of 2010 started with the active portfolio extension. The orders scope for the quarter increased from 4.9 to 6.5 months and therefore, reached the pre-crisis level (January 2006 – 6.7; in 2007 – 6.7; in 2008 - 7 months).
Pricing policies of enterprises in early 2010 was influenced by the growth in demand for manufactured products and the traditional New Year upsurge in prices and tariffs. However, both factors at this time, though not as strong as at the best of times, pushed up the actual price dynamics and price plans of the manufacturers, although a modest crisis result of January 2009 was, of course, surpassed. In January 2010 a moderate decline of prices in November - December gave way to a more intensive growth. The January growth rate of the wholesale prices reached the maximum of the previous crisis months and had all the chances to continue - pricing plans for businesses, too, have reached the crisis peak in January.
HR plans of enterprises suffered in January 2010 the most significant changes. Within the month the balance of intentions has changed from sharply negative (reduction of employees) (-25 points) to expressly positive (recruitment) (+7) and has become another crisis maximum peak (see Fig. 8). Thus, the Russian industry for the first time during the current crisis has declared of the desire to abandon the dismissals and start to hire employees.
Reduction in the number of employees and the positive dynamics of the main industry performance indicators have helped the companies to recover the situation with the payroll. In early 2010, the normal level of salaries of workers and engineering manpower went to the Russian industry 49 per cent of enterprises (see Fig. 9). Before the crisis, this figure exceeded, as a rule, 50 per cent and reached 60 per cent, while the share of enterprises with low wages (below normal level) was then about 40 per cent. In January 2010, the latter indicator dropped from the crisis peak of 59 per cent (in the II quarter of 2009) to 47 per cent.
In February the industries have again demonstrated the dynamics of sales and production, similar to the pre-crisis level. The growth of demand rate (based on initial data) in February RUSSIAN ECONOMY IN trends and outlooks has improved significantly for the first time during the current crisis and ceased to be negative, i.e., the share of enterprises whose sales have increased, becoming equal to the shares of the enterprises, decreasing the sales. But the removal of seasonality has reduced the optimism of the data cleared from seasonal factors - in the industry there were only minimal for the current crisis reduced demand for products, which, incidentally, also looked very good as compared with what happened a year earlier.
In February, the share of normal estimates of demand fell by 9 points and rolled off to the level of September - October 2009 This figure indicated the sharp swings since November 2009, which indicates the disorientation of producers, who do not seem to understand what is happening with the economy and what sales volumes should be considered adequate to the current economic situation.
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