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. Last Updated: 07/27/2016

KamAZ Gets Credit to Build Okas

The Russian government has awarded an 82 billion ruble ($14.2 million) credit to the KamAZ automaker for production of its Oka light passenger car in a move analysts say could boost production to 40,000 vehicles a year.

The decision by the Economics Ministry to offer the credit is yet another sign of the government's interest in stimulating the country's stagnant auto industry, the analysts said. It also reflects the high priority of KamAZ's new managers put on meeting the burgeoning demand for small, inexpensive cars.

"While the KamAZ production of trucks has stabilized at around 20,000 [vehicles] over the last couple of years, the number of light vehicles it makes is growing by leaps and bounds," said Alexei Labovsky, an analyst at CentreInvest Securities.

Labovsky said KamAZ produced slightly more than 8,500 such cars last year, but that 1997 production was likely to jump to about 25,000 cars.

KamAZ, which appears to be an increasingly attractive performer in light of recent debt restructuring and tax breaks provided by the Tatarstan government, is widely expected to break even this year. Experts said that rapidly increasing its production share of light vehicles could play an important role in meeting its 1997 goals.

But management at ZMA, the KamAZ subsidiary which produces the Oka, stressed that winning approval for the credit is a far cry from obtaining the money from a government battling to collect money rather than spend it.

ZMA's economic manager Valery Korablev said it could take months to begin benefiting from the credit, which is unlikely to arrive in the form of cash.

"A decision setting aside the money is just the first step," Korablev said. "Now the work is under way to make all the arrangements necessary for actually getting the money -- which in the end is likely to be in the form of promissory notes or privileges, since the government is so cash-strapped."

Korablev said the domestic market for small, maneuverable cars like the Oka is large and growing, and that such cars could one day be a source of stiff competition to the well-known Lada.

ZMA has won several international contracts for exporting the Oka, including one to Uruguay, and is known for its specialty niche among the disabled, who favor the car's size and maneuverability as well as modifications which allow drivers to control the car manually.

"And there are easily as many others who, at a price maybe of 20 [million] to 22 million rubles, will prefer the Oka-type cars to Ladas when it comes to driving to their dacha vegetable plots," he said.