Russia has more than doubled import duties on old second-hand cars in a move to assist its troubled domestic car industry, according to local media reports.

The raised duties will make an average, seven-year-old car up to 2,000 euros (�1,268; $1,901) more expensive, said analysts.

Duties on new and nearly new cars will remain unchanged at 25%.

The duties for slightly older cars aged between 3 and 7 years will also remain unchanged at up to 1.4 euros per cubic centimetre for cars with large engines.

The raised import duties for even older cars are expected to make such cars virtually disappear from Russia's roads, and the government's hope is that many will buy Russian made cars instead.

Tough competition

New cars in Russia cost between 4,000 and 8,000 euros, roughly the same as a four-to-six-year-old equivalent car imported from, say, Germany.

Eight out of ten of the 450,000 cars imported in 2001 were second-hand.

Almost a fifth of the 22 million cars in the country are foreign, and their proportion is increasing.

"There is a healthy demand for cars in Russia, but production by Russian constructors is stagnant and they are even losing market share," said United Financial Group in Moscow.

Attractive investment

Initially, the Russian car industry may be unable to supply enough cars to meet the fresh demand for home-made cars which is expected to arise from the government's move.

But since their future earnings potential are set to be enhanced by the removal of some of their competitors, they should be able to attract fresh cash injections from investors.

Once this trickles down to expanded capacity, the Russian car industry's market share could once again grow.

And as the under-developed market is expected to grow as well, investors could be lucky and achieve a substantial return.

Currently, Russia has 140 cars per 1,000 inhabitants, compared with 550 in the US.

Improved image

Many foreign car makers are keen to enter into joint ventures with Russian car makers to take advantage of the market's anticipated growth.

Russia's car industry is keen to attract foreign players because of their greater reputation for quality and because of their larger financial muscle.