Russian parliament, the State Duma, accepts legislation mandating taxi services to transition exclusively to domestically-produced vehicles.
Taxi Localization Bill Bites Russia's wheels, stirs controversy
Straight from the State Duma, a controversial bill aimed at beefing up the localization of vehicles in taxis has stirred up quite a storm. Driving through its second and third readings, this baby is shaping up to be a game-changer for the Russian auto sector, but not without generating a fair amount of heat along the way.
Initial reactions, led by State Duma Speaker Vyacheslav Volodin, labeled the bill as "raw," requiring a total overhaul courtesy of the relevant committee, ministry, industry stakeholders, and the community. (Just for kicks, that bit of insight comes courtesy of TASS.)
First submitted in November 2023, the bill sought to support the domestic auto industry by mandating taxi parks to switch to cars made by Russian manufacturers. The original plan established a requirement that, come October 1, 2025, a vehicle must score a minimum localization level of 3,200 points to secure a taxi permit. Neat, right?
Well, not so fast. Upon scrutiny, only cars from AvtoVAZ and a limited range of homegrown models met these requirements. Welcome to the revised bill, with modified criteria, including matching the total localization points with those mandated for government procurement and being produced under a special investment contract between March 1, 2022 to March 1, 2025. From 2033 onwards, localization points alone will determine a vehicle's inclusion in the taxi registry, or, if an investment contract was signed post-March 2025, based on a government decision.
Acknowledging the challenges in the Kaliningrad region, Siberia, and the Far East, the law's enforcement has been postponed until March 1, 2028, and March 1, 2030, respectively. set to take effect on March 1, 2026.
Unsurprisingly, this heavy-duty legal steer has ruffled some feathers. Opposition from business groups, taxi associations, and HSE's Institute of Transport Economics and Transport Policy warns of a $3.5 billion hit on the federal budget over three years, exodus of up to half a million drivers, and a surge in taxi fares. Citing concern about the bill's potential negative impact on service quality, the Union of Digital Platform Users "Digital World" even penned a letter to Volodin, likening it to a ban on 2.5 million people earning extra income via their cars.
The controversial taxi localization bill, a push for Russian-made vehicles, seems to teeter on the brink of costing operators a massive fortune, shrinking the market, and fueling fare hikes. All this, while facing flak for its inflexible nature and potential to disrupt the taxi sector and related industries for years to come.
In light of the ongoing debate, the revised taxi localization bill, designed to support the Russian auto industry, is predicted to impose hefty financial burdens on operators, potentially leading to a significant reduction in the market and raised taxi fares. This contention is further fueled by concerns over the bill's rigidity and its potential impact on the quality of services offered, affecting not just the taxi sector, but also interconnected business sectors and finance.
