New car strategy agreed as Prokhorov jumps the lights on hybrids

Investment into Russia's car industry may top $40 billion in the upcoming ten years, after the Russian government has given the go-ahead to the country's car strategy on Thursday.

Becoming a player on the global car market doesn't come cheap. Russia is ready to fork out, splashing some $20 billion of budget money.

Five million people are expected to get jobs in related industries, over the next decade.

The share of imported cars will drop to 20% according to the government strategy.

Presently about 30% of the cost of a new imported vehicle is accounted for by customs duties, and officials say high import rates will have to stay for another five years.

The strategy outlined on Thursday doesn't include the latest project of the Russian billionaire Mikhail Prokhorov, who hopes to cash in on demand for hybrid vehicles.

The auto industry is moving to simpler, greener cars. These are as simple to assemble as toys. Our country has a chance to compete, because foreign carmakers will need time to adapt to this new trend. By the end of the year we will present a car platform which will be used in three types of vehicles: a truck, a conventional city car, and a sports vehicle for younger buyers. The new city car will be a multimedia centre on wheels.

Andrey Rozhkov, Transport Analyst at IFC Metropol, says the tycoon's plan to start production in 2012 means he will need quick answers on key questions.

“Mikhail Prokhorov will have to tackle a number of issues. The inability to solve any one of them will lead to the failure of the whole project. Producing such a car from scratch in such a short period of time. Preparing to market the new product. And building the network of natural gas stations.”

Prokhorov remains optimistic, hoping eventually to export his car, while Russia's government is looking abroad for assets to buy. It will set aside another $5 billion for the purpose.