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In brief

The Russian Government approved the Concept for the production and use of electric vehicles until 2030 (“Concept“). Electric vehicles envisaged those powered by electric batteries and hydrogen fuel cells (EVs), including passenger cars, trucks and similar vehicles.1


Key takeaways

The Concept aims to: (i) kick-off production and incentivize greater use of EVs; (ii) develop production of their components and charging infrastructures; (iii) make the most out of Russia’s precious metals and other raw materials’ potential, such as lithium, nickel, copper, cobalt and aluminum, given its demand in the EV industry; (iv) launch brand new EV-related products such as post-lithium batteries based on sodium and hydrogen fuel cells, including those for heavy vehicles; (v) develop cross-cutting technologies in the areas of batteries recycling, new materials, cybersecurity, navigation, smart driving and various IT solutions.

Implementation of the Concept triggers opportunities for multiple industries, including automotive, equipment manufacturing, mining, as well as R&D.


Milestones and targets

The Concept will be implemented in two stages. The first stage will run from 2021 to 2024 and should result in the launch of at least 25,000 locally manufactured EVs and 9,400 e-charging stations, of which no less than 2,900 should be fast-charging.
The second stage will run from 2025 to 2030 and should result in:

  • EVs share reaching at least 10% of the total vehicles production; 
  • launch of cells production for traction batteries,
  • launch of the production of cathode and anode materials
  • launch of at least 72,000 e-charging stations, including 28,000 fast-charging stations;
  • launch of at least 1,000 hydrogen charging stations;
  • at least 39,000 high-skilled jobs in electrochemistry, electromechanics, electronics and EVs production.

Market projections

In addition to the above targets, the Concept projects three scenarios for the EVs market by 2030:

  • Slow-response: implies no incentives for the EVs and infrastructure. In that case Russia will be producing about 100,000 EVs by 2030. The total number of EVs will not exceed 540,000 – being 5% of the total EVs in the market;
  • Balanced: implies maximum incentives for EVs infrastructure and demand in the first three years of the respective projects’ implementation. In that case Russia will be producing about 220,000 EVs by 2030. The total number of EVs will exceed 1,400,000 – being 15% of the total EVs in the market;
  • Accelerated: implies proactive incentives for EVs infrastructure and demand, as well as restrictions for combustion engines. In that case Russia will be producing about 220,000 EVs by 2030. The total number of EVs will amount to approximately 3,230,000 – being 30% of the total EVs in the market.

According to the media, implementation of the Concept will require RUB 591 billion (ca. EUR 6.8 billion). The Government expects that the private sector will fund more than 80% of this amount, namely RUB 499 billionn (ca. EUR 5.7 billion).

Incentives 

The Concept envisages that the authorities may incentivize the market development, in particular, via:

  • special investment contracts (SPIC) that they may enter into with investors in the localized production of EVs, their engines, batteries, hydrogen fuel cells, cathode and anode material, various electronics and other equipment. SPIC may entitle the investors to stabilize the regulatory and tax regime for its projects, as well as be eligible for certain subsidies and other incentives;
  • consumer demand stimulus for domestic EVs through federal and regional incentives such as lower rates of transport tax, parking fees, free rides on toll roads and lower interest rates under consumer loans to purchase EVs;   
  • removing regulatory barriers by improving the technical regulations and standards. 

Investments perspective

Apart from SPICs2, Russia is currently incentivizing major capital investments through other mechanisms that may help stabilize the project’s regulatory regimes, obtain tax and customs benefits, access land plots and certain infrastructures, preferential foreign employee quotas and other stimulus measures. 

Such benefits may derive from investment protection and promotion agreements (IPPAs), regional agreements for implementation of special priority or large-scale investment projects, as well as from residency in special economic zones, territories of advanced development and territories with unique status.

Russia also offers a number of special regulatory frameworks for R&D activities, for instance, for residents of Skolkovo Innovation Center, innovation science and technology centers (also referred to as technological valleys), participants of the governmental National Technological Initiative and regulatory sandboxes for digital innovations.

Russian EVs in context: Sustainability policy run-up 

The Concept is a follow up to Russia’s first-ever and recently adopted greenhouse gas law. The country has also extended its renewables program and released its vision of the hydrogen policy. It continues reforming its waste management system, developing its National Green Taxonomy and running an environmental national project ‘Environment’ affecting the country’s major polluters. 

For further details on Russia’s climate, cleantech and environmental protection policy, please see section 25 of Baker McKenzie’s Doing Business in Russia guide.


1 Categories М 1 (light motor passenger vehicles with up to 8 seats excluding driver), М 2 (buses, trolleybuses, specialized passenger transportation vehicles with up to 8 seats excluding driver with a weight up to 5 tons), М 3 (buses, trolleybuses, specialized passenger transportation vehicles with more than 8 seats excluding driver with a weight exceeding 5 tons), N 1 (trucks weighing up to 3.5 tons), N 2 (trucks weighing between 3.5 – 12 tons), N 3 (trucks weighing more than 12 tons) and L 7 (certain types of quad runners).

2 For further details on Russia’s incentives for investments and innovation activities please see section 3.4 of Baker McKenzie’s Doing Business in Russia guide.

Author

Maxim Kalinin serves as managing partner of Baker & McKenzie’s St. Petersburg office and head of the Mergers & Acquisitions, Corporate, Real Estate & Construction and Employment practice groups. He was named a European legal expert in Russia by European Legal Experts 2008, and was recognized by Chambers Europe "for his expertise in M&A and real estate work". He is also cited by Legal 500, Who’s Who Legal 2009, The International Who’s Who of Real Estate Lawyers 2008 and the Private Equity Handbook 2007/2008 for his corporate and real estate work

Author

Roman Ishmukhametov is an associate in the St. Petersburg office of Baker McKenzie. Prior to joining Baker McKenzie in 2013, Roman worked as an in-house lawyer in one of the leading providers of telecommunication services in Russia. Sources of The Legal 500 EMEA 2019 state that Roman is "a very knowledgeable and committed associate."

Author

Olga Pankova is an associate in the St. Petersburg office of Baker McKenzie. Prior to joining Baker McKenzie in 2012, Olga worked as the head of the legal department of a major St. Petersburg real estate investment company, as a legal consultant at one of the major international audit and consulting firms, as a lawyer in the legal support department for the securities market section at one of the leading investment companies in the North-West region of Russia, as a judge's assistant at the St. Petersburg Charter Court as well as a lawyer at the St. Petersburg University of Humanities and Social Sciences, all in St. Petersburg.

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