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Russia 'Clunkers' program clears rubble

A truck uses a metal car to pick up an old car in Moscow as part of Russia's "Cash for Clunkers" program.

TEXT OF STORY

Steve Chiotakis: "Cash for Clunkers" was a big hit in this country last year. The aim of the government stimulus program was to boost auto sales. Various European countries had their own versions, and about a month ago, Russia launched one. It's $3.5 billion program comes just as auto sales there are in a big slump. Peter van Dyk reports from Moscow.


Peter van Dyk: A giant metal claw picks up one of several dozen rusty old Ladas from a parking lot at a car dealership in northern Moscow. Then, it dumps it onto the back of a truck. The owner of each car got $1,700 towards the cost of a new Russian-built vehicle under the government's new program.

Vladimir Ryabushko is the general director of a branch of Russia's largest auto dealer, Avtomir. He says 40,000 old cars were turned in to be scrapped during the program's first month.

Vladimir Ryabushko (voice of interpreter): Sure, the program will be a success. It was supposed to run for nine months, but it's clear the subsidies will end earlier. Within six months, the funds allocated by the state will run out.

For the cheapest models, the rebate is a third of the sticker price. Without the government money, car buyer Vladimir Semyonov says he certainly wouldn't be trading up.

Vladimir Semyonov (voice of interpreter): I don't have that kind of money to buy a new car, but I can sell my old one to the government for 50,000 rubles and buy a new one.

Mr. Semoyonov may have to wait three months for the Lada he wants. The manufacturer, car giant AvtoVAZ, is struggling to crank up production. Last year, it only escaped bankruptcy with state help, so it welcomes the increased demand.

As in other countries, boosting car sales is a main goal of the program. But in Russia, disposal of the vehicles may also have another long-term beneficial effect.

Vladimir Bespalov covers the transport sector for VTB Capital investment bank:

Vladimir Bespalov: The scrappage program is something new for Russia. And many Russian cars previously just had been thrown away; sou could see them on the streets. So the culture of junk yards has not been developed in Russia prior to this program. So if they manage to build these scrappage centers, this would be a good success.

Some say the program is a success already. Autovaz says it has sold 11,000 cars under the program in the first month alone.

In Moscow, I'm Peter van Dyk for Marketplace.

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