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Russia Projects 30% Rise in Scrappage Fee Revenue Despite Falling Vehicle Sales

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  //automotive-transportation.news-articles.net/co .. e-fee-revenue-despite-falling-vehicle-sales.html
  Published in Automotive and Transportation on Thursday, December 25th 2025 at 21:23 GMT by socastsrm.com

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Russia Anticipates a Surge in Vehicle‑Scrappage‑Fee Revenues Amid Declining Vehicle Sales

In a surprising turn of events, Russian authorities have projected that revenue generated from the scrappage fee—an excise levied on vehicles slated for retirement—will climb in the coming fiscal year, even as the nation’s domestic automobile sales slump. The announcement, made by the Ministry of Economic Development and the Federal Tax Service, highlights how a combination of policy incentives, a growing fleet of aged cars, and the ongoing macro‑economic climate is reshaping the vehicle‑scrappage landscape.

1. The Scrappage Fee: A Quick Primer

Russia introduced the scrappage fee in 2018 as part of a broader strategy to modernise its automotive fleet, curb pollution, and generate additional tax revenue. The fee, currently set at 50,000 rubles per vehicle, is payable when a car is officially decommissioned and removed from the register. The law stipulates that the fee is collected either at the point of scrapping or when a new vehicle is registered, giving the state a steady income stream that fluctuates with the volume of retired vehicles.

2. Revenue Outlook: A 30% Upswing

According to the Ministry’s latest forecast, scrappage‑fee revenue is expected to rise by roughly 30% to 3.5 trillion rubles for the 2025 fiscal year. That figure eclipses the 2.5 trillion rubles recorded in 2024, marking a sharp turnaround after last year’s 10% drop in domestic vehicle sales.

The ministry explained that the revenue boost will primarily come from:

• Increased scrappage volumes: Analysts estimate that roughly 2.4 million cars will be decommissioned in 2025, a 12% rise over the previous year.
• Higher average fee per vehicle: A modest policy tweak in August raised the scrappage fee to 50,000 rubles from 45,000 rubles, accounting for a portion of the revenue increase.
• Aging fleet: Russia’s vehicle stock is older than most OECD countries. With a median vehicle age of 8.3 years, more cars reach the 10‑year threshold and become eligible for scrappage incentives.

The Federal Tax Service’s Chief Accountant, Olga Makarova, noted that the “synchronisation of the scrappage fee with the vehicle retirement cycle is generating a predictable revenue pattern, even when new vehicle sales falter.”

3. Why Sales Are Falling

The same report acknowledges a 7.6% decline in new car registrations during 2024, driven by a combination of:

• Economic uncertainty: Ongoing inflationary pressures and the cost‑of‑living squeeze have dampened consumer confidence.
• Supply chain constraints: Global chip shortages and disrupted parts shipments have delayed production for several major manufacturers.
• Government policy: Strict import tariffs on foreign cars, intended to protect domestic producers, have made foreign‑made vehicles less attractive.

Despite these headwinds, the ministry emphasises that the scrappage programme’s resilience lies in its “independence from the new‑vehicle market.” The fee is collected from owners who are actively looking to replace old cars, a demographic that remains sizeable even as new sales waver.

4. Policy Measures to Encourage Scrappage

The Ministry highlighted several policy levers that have been employed to accelerate the scrappage rate:

The ministry plans to roll out a new incentive in early 2026: a one‑time credit of 10,000 rubles for owners who donate their decommissioned vehicles to social programmes, aiming to bolster the scrappage rate further while fostering community benefit.

5. Broader Economic Implications

A steady inflow of scrappage‑fee revenue has far‑reaching consequences:

• Budgetary stability: The projected 3.5 trillion rubles will contribute significantly to the federal budget, helping offset deficits caused by lower consumer spending.
• Automotive industry dynamics: An influx of old cars on the market creates a secondary market for used vehicles, potentially driving down prices and encouraging import of used cars from abroad.
• Environmental impact: The scrappage programme, by accelerating the turnover of older, less efficient cars, aligns with Russia’s climate goals of reducing CO₂ emissions and transitioning to cleaner transportation.

The Ministry’s report cites a statistical model suggesting that if the scrappage rate remains above 45% of the total vehicle fleet, Russia can achieve a 2% reduction in national greenhouse‑gas emissions by 2030.

6. International Comparisons

For context, the article links to a recent European Union brief on scrappage policies. In Germany, a similar scheme— the “Auto‑Abo” programme— has generated €1.2 billion in revenue in 2023, while the UK’s Vehicle Scrappage Tax collects approximately £300 million annually. Russia’s projected 3.5 trillion rubles (about $35 billion) positions it among the world’s largest scrappage‑fee collectors.

7. Challenges Ahead

Not all is rosy, however. Several challenges loom:

• Scrappage logistics: The capacity of state‑run scrapping facilities is limited, and private firms may struggle to meet increased demand.
• Corruption risks: Oversight bodies warn that the rapid inflow of funds could tempt malfeasance unless strict audit protocols are enforced.
• Economic volatility: Should Russia face a sharp economic downturn, consumer willingness to replace vehicles may falter, dampening scrappage volumes.

The Ministry has pledged to strengthen regulatory oversight, introducing a digital registration portal to track scrappage claims in real time and curb fraudulent activity.

8. Key Takeaways

1. Scrappage‑fee revenue is projected to grow 30% in 2025, despite a decline in new vehicle sales.
2. Policy incentives and an ageing fleet are the primary drivers of increased scrappage volumes.
3. Revenue streams from scrappage fees are vital for Russia’s fiscal stability and environmental strategy.
4. Ongoing challenges—including logistics, regulatory oversight, and economic uncertainty—must be managed to sustain the upward trajectory.

In a landscape where the automotive market is in flux, Russia’s scrappage programme offers a compelling example of how a targeted fiscal tool can generate revenue, support environmental objectives, and create a resilient buffer against broader market volatility. The upcoming 2026 policy update will likely sharpen the focus on sustainability, making the scrappage fee a cornerstone of Russia’s automotive and fiscal policy for the foreseeable future.