USSR: ABOUT TO ENTER THE AUTOMOTIVE AGE?

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP69B00369R000100240112-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 30
• Document Creation Date: December 15, 2016
• Document Release Date: April 13, 2004
• Sequence Number: 112
• Publication Date: July 1, 1966
• Content Type: IR

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Copy No. 121
CIA/RR ER 66-13
JULY 1966
INTELLIGENCE REPORT
USSR: ABOUT TO ENTER THE
AUTOMOTIVE AGE?
NOT TO BE IU PROLIUCED IN Wh(DLE OF
IN PART WITHOUT THE OF
THE CENTRAL INTELLIGENCE AGENCY
DIRECTORATE OF INTELLIGENCE
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NOTICE
This report has been Ioz,ne-i to !.he recipient by
the Central In t ell er ems, When i t has
served its purpose it should O L' destroyed or
returned to the:
CIA Librarian
Central Intelligence Agency
Washington 25, D. C.
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CONTENTS
Page
Summary ................................................ 1
..................................
I. Plans and Feasibility 3
II. The Automobile in Soviet Society ........................ 7
III. Automobiles on the Road, 1966-75 ...................... 11
IV. Primary Investment ................................... 13
V. Secondary Investment ................................. 15
A. Introduction ....................................... 15
B. Ferrous Metals Requirements ........................ 16
C. Machine Tools ..................................... 17
D. Tires ........ 17
..................................... .
E. Gasoline .......................................... 18
VI. Tertiary Investment ................................... 19
A. USSR ............................................ 19
1. Introduction .................................... 19
2. Highways ....................................... 19
3. Service Stations and Garages ...................... 20
4. Social Considerations ............................ 23
B. The Experience of the United States and Western Europe 23
1. The United States ............................... 23
2. Western Europe ................................. 24
APPENDIX
Page
Estimated Costs of Buildings and Equipment of the Fiat Plant ... 29
TABLES
Page
1. Estimated Production of Automobiles in the USSR, 1966-75 ... 3
2. Production and Stock of Automobiles in Selected Countries,
1964 7
...............................................
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Page
3. Estimated Stock of Automobiles in the USSR, 1966-75 ....... 11
4. Estimated Number of Newly Produced Automobiles Avail-
able for Private Use in the USSR, 1966-75 ................ 11
5. Soviet, Italian, Western European, and US Participation in
the Estimated Costs of the Fiat Plant to be Constructed
in the USSR ......................................... 14
6. Production of Selected Ferrous Metals and the Share Re-
quired for Production of Automobiles in the USSR, 1965,
1970, and 1975 ...................................... 16
7. Length of Highways in the USSR and the United States,
1940, 1950, and 1960-64 .............................. 20
ILLUSTRATIONS
Page
Figure 1.
USSR: Estimated Construction Time Schedule of
Fiat Plant (chart) .............................
4
Figure 2.
Models of Soviet Automobiles (photographs) ........
8
Figure 3.
USSR: Construction of Surfaced Highways, 1959-64
and 1966-70 Average (chart) .................. 21
Figure 4.
Hypothetical Relationship Between Stock of Auto-
mobiles and Supporting Investment (chart) ...... 25
Figure 5.
United States and Western Europe: Comparative
Indexes of Automobile Stock and Highway Ex-
penditures, 1910-20 and 1955-64 (chart) ......... 26
Figure 6.
United States: Annual Production and Stock of
Automobiles and Highway Expenditures, 1922-
64 (chart) .................................. 27
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USSR: ABOUT TO ENTER THE
AUTOMOTIVE AGE?
SUMMARY
The widely publicized Soviet decision to boost production of auto-
mobiles* brings the USSR one step nearer the automotive age. How-
ever, announced plans are not so grandiose as to require a significant
alteration in traditional Soviet economic priorities, and would leave
military and space programs unimpaired. Even with the usual slip-
page in Soviet construction plans, output of automobiles probably
could accelerate to 460,000 by 1970 and to 1.1 million by 1975. This
would provide the Soviet Union with an automobile stock roughly
equal to that of the United States in 1917, and, on a per capita basis,
about 5 percent of the current US inventory. Perspective can be
gained by projecting Soviet per capita availabilities to 1975 and com-
paring them with the inventories that already exist in Western Euro-
pean countries; in each case, the Soviet expectation is a small fraction
of the realized Western level.
Essentially, the new Soviet program is designed to produce auto-
mobiles for the bureaucratic and managerial elite, not for the average
citizen. By the early 1970's, perhaps half of the automobiles produced
will be available for public purchase, rather than for government use.
It seems certain that, within the next decade at least, the Soviet leader-
ship not only has no plans to mass produce automobiles in imitation
of the West, but would strenuously resist internal pressure to do so.
Although the USSR may some day join the circle of nations that pro-
vide automobiles for the average citizen, that day is not now in sight.
Direct investment needed to fill the present Soviet program will be
about $1.2 billion,** of which $800 million is planned for the construc-
tion of a Fiat automobile plant in the USSR. The French firm of
Renault may play a role in reconstructing the present Moskvich plant;
other facilities will be expanded by the USSR itself. Through 1970,
* The term automobile as used throughout this report refers to passenger automobiles; the
term motor vehicles includes not only automobiles but also trucks and buses.
** Expressed in current US dollars, unless otherwise indicated.
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the investment will represent less than 1/z of 1 percent of all Soviet
investment in industry and 4 to 5 percent of machine building invest-
ment. Even these data overstate the burden, for repayment on the
Fiat contract will stretch well into the 1970's.
Indirect investment required for the supporting facilities for the
production of steel, gasoline, and tires has not been fully calculated,
but appears to be on the order of $400 million-substantially less than
the direct investment.
So-called tertiary investment-in highways, gasoline stations and
service facilities, motels, and the like-also needs to be added to the
bill. An examination of Soviet plans for highway development during
the next five years reveals that these call for only a modest increase
over the previous five years-about 20 percent in terms of kilometers,
or an expenditure of about $1.2 billion a year. Road density in the
USSR by 1975 will be considerably below that of most Western Euro-
pean countries and the United States. Furthermore, Western experi-
ence demonstrates that for several decades after a country begins the
acceleration of automobile production, the tempo of supporting in-
vestments increases only slowly. Not until there is a large, widely
distributed stock of automobiles does a rapid acceleration take place.
Some amelioration in the Spartan level of service and maintenance
facilities will be needed. At present, there are only eight gasoline
stations and eight garages in Moscow. If the Soviet regime increases
the number of such facilities at the same rate as in the past, the cost
by 1975 would be about $175 million. The lack of adequate main-
tenance facilities is reflected in the fact that approximately one-fifth
of the automobiles in the Soviet motor inventory are normally out of
service, awaiting repairs.
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1. Plans and Feasibility
For production of automobiles, the Soviet five-year plan (1966-70)
implies an average annual rate of increase of 28 to 32 percent in
contrast to the rate of 7.7 percent achieved during the past five years
(1961-65). For the first time, a Soviet plan calls for a greater output
of automobiles than trucks, as shown in the following tabulation.
Production
(Thousand Units)
1965 1970 Plan
Automobiles .............................. 201.2 700 to 800
Trucks ................................... 379.6 600 to 650
Buses .................................... 35.6 60
Total .................................. 616.4 1,360 to 1,510
Although the USSR appears ready to commit more investment to
the automobile branch of the motor vehicle industry, it seems unlikely
that the 1970 goal of 700,000 to 800,000 automobiles will be reached
before 1972 (see Table 1).
The plant to be built in the USSR by the Fiat company will be
capable of producing 600,000 automobiles a year when operating at
capacity and will be the single most important source of increased
production of automobiles. (For the schedule of the Fiat plant, see
the chart, Figure 1.) Other significant output increases could come
from a planned modernization of the Moskvich automobile plant in
Moscow, from a new automobile plant at Izhevsk that is to begin
Table 1
Estimated Production of Automobiles in the USSR ?
1966-75
MODEL
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
Volga ..............
56
58
60
63
66
70
75
80
85
90
Moskvich ..........
74
83
88
90
100
120
140
160
180
200
Zaporozhets .........
48
57
67
76
84
90
95
100
100
100
Izhevsk ............
0
8
30
50
80
100
100
100
100
100
Fiat ...............
0
0
0
5
100
250
400
500
600
600
GAZ 69b ...........
28
28
28
28
28
28
28
28
28
28
Total' .. ........
210
230
270
310
460
660
840
970
1,100
1,100
' Based on a study of the past performance of the Soviet automobile industry, the current
five-year plan for the industry, recent press announcements, and a study of the individual
automobile plants. Data are rounded to two significant digits. Because of rounding, com-
ponents may not add to the totals shown.
'A jeep type of vehicle.
Including production of 100 ZIL-111's and 200 Chaika's per year.
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Figure 1
USSR
ESTIMATED CONSTRUCTION TIME SCHEDULE
OF FIAT PLANT
Initial
Production
and
Checkout
Excavation and Foundation
Preparation, Utilities
Clearing, Drainage,
Access Roads
Design, Planning,
Engineering
Site
Selection,
Preliminary
Survey
Road
Paving
Regular Ik Full Capacity
Finish
Grading
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production of the Moskvich 408 later this year, an rom the planned
modernization of the Gor'kiy motor vehicle plant.
There are several reasons for estimating that the USSR will not
achieve its 1970 goal for automobile production. It is well docu-
mented that Western builders experience long delays when working in
the Soviet bureaucratic and technical environment. The Fiat plant
is not expected to be completed until mid-1969 and will probably not
be producing at capacity until 1974. In addition, the modernization
and expansion of present automobile plants and the start of produc-
tion at Izhevsk is not likely to move with the speed necessary to achieve
the 1970 goal-Soviet planners have always been slow in starting new
production. Finally, extensive renovation of the Moskvich plant will
cause protracted disruptions in production.
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II. The Automobile in Soviet Society
The USSR has only a toehold in the automotive age. Steady in-
creases in Soviet automobile production in the last decade boosted
output to 201,200 units in 1965, but judged in relation to demand in
the USSR as well as production in other industrially advanced coun-
tries, such a level of output is minuscule. The production and inven-
tory of automobiles in the USSR in comparison to other selected coun-
tries is shown in Table 2. (For models of Soviet automobiles, see
Figure 2.)
The small size of the automobile industry in the USSR is clearly
the result of calculated neglect by Soviet policymakers, both under
Stalin and later under Khrushchev. Indeed, Khrushchev was fond
of pointing out that the mass production and distribution of automo-
biles was a "weakness" of capitalism which the USSR had no inten-
tion of emulating. Instead, he advocated the establishment of rental-
car services in the major cities-a policy that has worked very poorly in
the few cases where it has been tried.
Khrushchev's attitude undoubtedly stemmed in large part from a
conviction that the USSR could not afford to provide its people with
automobiles if it was to meet priority commitments in the develop-
ment of heavy industry, military weaponry, and space technology.
Noneconomic explanations for this neglect were probably equally im-
Table 2
Production and Stock of Automobiles in Selected Countries
1964
Production
Stock of
Automobiles '
Automobiles per
Million Population
Argentina .........
114,617
800,000
36,400
Australia ..........
340,614
2,599,000
234,000
Belgium ..........
327,899
201,000
21,400
Canada ...........
560,678
5,122,000
265,000
France ...........
1,390,312
7,960,000
164,000
Italy .............
1,028,930
4,632,000
90,600
Japan ............
579,660
1,672,000
17,300
South Africa ......
143,373
1,023,000
58,500
Spain ............
119,000
652,000
20,800
Sweden ..........
160,106
1,666,000
217,000
United Kingdom ...
1,867,640
8,436,000
156,000
United States .....
7,745,492
71,950,000
375,000
USSR ............
185,200
919,000
4,000
West Germany ....
2,650,183
8,100,000
144,000
'Based on automobile registrations, except for Soviet data, which are estimated.
' Based on midyear population.
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Largest car availab=le to t'he public;
a':tcail price S6,00C Pill",
KVICH 408- Popular model of the
,kvich line; retail pr
F'if;Lre 2
'g:?R(',7HFTS- Smai F est and most unpoF i, ,:ir
car; rercil price bour
A :~ r_omparub l e fo the Moskvich 41C 8;
likely ch air?e foli the Fiat nl's ci
models produced in hmftedi quantities
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portant to Khrushchev-for example, the problems of po itica control
and the potential dangers of sociological changes that have been con-
sidered anathema to the Communist leadership.
Kosygin's views on the automobile are not revolutionary but suggest
some catering to the bureaucratic elite and to the aspirations of Soviet
consumers in the upper middle class. This does not mean a program
that will lead to an automobile for every Soviet family. Kosygin's
speech to a meeting of the State Planning Committee on 19 March
1965 is the most complete statement thus far issued from Moscow on
the reasons behind the plan to boost automobile production:
You know how staunchly the idea was imposed that there was no necessity in our
country to develop the production of passenger automobiles on a large scale. Let
all people ride only in buses, so to speak. Everything has been done to deprive even
the leaders of big enterprises and economic organizations of the right to use passenger
cars. Is this correct? The result has been that many leaders have been compelled
to use trucks unlawfully for their official rides. An apparent saving was made on
transport costs, but in fact damage was inflicted on our economy.
The plans thus far released by the Soviet leader appear to confirm
the viewpoint implicit in this quotation. In 1965 there were 4,350
automobiles per million population; it is estimated that there will be
about 7,000 by 1970 and about 17,000 by 1975. The Soviet inventory
in 1975 would be about equal to that in the United States in 1917.
On a per capita basis of comparison, this 1975 Soviet achievement
would be about 5 percent of current US inventory levels. The re-
stricted nature of the automobile plan can also be seen from the fact
that, at present, Italy, with a per capita gross national product (GNP)
of less than $1,200, provides one automobile for every 10 persons.
In comparison, by 1975 the USSR, even with a projected per capita
GNP of $1,900, will provide only one car for every 60 persons.
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Ill. Automobiles on the Road, 1966-75
At present, the Soviet inventory of automobiles, publicly and pri-
vately owned, is estimated to be about 1 million automobiles (see
Table 3). By 1970, the inventory probably will be 1.7 million. De-
spite the planned increase in numbers of automobiles by 1975, few
Soviet citizens will have their own. A large share of total produc-
tion per year will continue to go for official use-that is, publicly
owned cars operated by administrative personnel, factory managers,
the military, and taxi services (see Table 4). Approximately one-
fifth of the inventory is normally out of service, awaiting repairs.
Table 3
Estimated Stock of Automobiles in the USSR'
1966-75
Starting inventory .
1,000
1,100
1,200
1,300
1,400
1,700
2,100
2,500
3,100
3,700
Production ......
210
230
270
310
460
660
840
970
1,100
1,100
Exports" ........
47
54
63
72
110
150
190
220
250
260
Imports `
2
2
2
2
2
2
2
2
2
2
Scrappage' ......
80
87
94
100
110
130
160
200
250
290
Year-end inventory
1,100
1,200
1,300
1,400
1,700
2,100
2,500
3,100
3,700
4,200
' Data are rounded to two significant digits. Because of rounding, components may not
agree with the totals shown.
b Assumed to be constant at 23 percent of production-the same level as 1961-64.
Assumed to be constant at 2,000 units.
'Assumed to be constant at 8 percent of the starting inventory.
Table 4
Estimated Number of Newly Produced Automobiles
Available for Private Use in the USSR'
1966-75
Production
.........
210
230
270
310
460
660
840
970
1,100
1,100
Exports"
...........
47
54
63
72
110
150
190
220
250
260
Imports `
...........
2
2
2
2
2
2
2
2
2
2
Official and commercial
use ..............
77
87
100
120
160
200
230
240
240
210
Private used ........
84
95
110
130
200
310
410
510
610
660
' Data are rounded to two significant digits. Because of rounding, components may not
agree with the totals shown.
" Assumed to be constant at 23 percent of production-the same level as 1961-64.
`Assumed to be constant at 2,000 units.
d For 1966-69, the number of automobiles available is assumed to be constant at 52 percent
of the figure arrived at when exports and imports are netted out of production. After 1969
the percent of net production increases by 4 percentage points per year, reflecting a larger
share of automobiles available to the public.
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IV. Primary Investment
If the USSR is to produce 1.1 million automobiles annually by 1975
(see Table 1), approximately $1.2 billion will have to be invested in
plant buildings, equipment, and direct manufacturing support facili-
ties. The following tabulation presents estimates of the investment
needed to modernize and increase the output of the existing plants as
well as to build the two new plants proposed by Soviet planners:
Production
(Thousand Units)
Investment
Required
Plant
1966
1975
(Million US $ )
Gor'kiy .................................
56.0
90
44
MZMA ..................................
74.0
200
190
Zaporozh'ye .............................
48.0
100
78
Izhevsk (to be built) .....................
0.1
100
130
Fiat` (to be built) .......................
0
600
800
Total ....................................................... 1,242
' Tol'yatti, formerly Stavropol', on the Volga.
Approximately $900 million of the $1.2 billion total investment will
have to be spent prior to 1970 if the estimated levels of production
are to be attained by 1975. The $900 million is about 0.5 percent of
expected total Soviet investment in industry and 4 to 5 percent of
total investment in machine building for 1966-70. The USSR is ca-
pable of allocating this small share of total new investment funds
to the automobile industry without resorting to any significant shifts
in present investment allocation plans, including those for the military
or space program. The financial burden on the USSR is eased by
the extended repayment terms of the Fiat agreement-terms of nine
years following completion date.
Most of the total investment of $1.2 billion needed by 1975 will go
into the proposed Fiat plant. An official of a large US automobile
company estimates that the total cost of direct manufacturing equip-
ment and buildings in such a plant would be $522 million. With sup-
porting facilities, the total cost would probably be within the range
of the $700 million to $800 million estimated by Fiat. Although the
details of the project have not yet been finally settled, a breakdown
of estimated costs of the Fiat plant and the degree of Italian, Western
European, and US participation is shown in Table 5 (for the costs of
specific parts of the plant, see the Appendix).
The total cost to the USSR of a fully operating automobile plant
to produce 600,000 cars per year will exceed $800 million. Training
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expenses will be considerable for the 30,000 to 40,000 employees
needed to operate the facility. Unless the major new plant is erected
in a large city, dwellings, schools, and other facilities will have to be
built. In addition, smaller investments will be required in industries
supplying raw materials and semimanufactured goods directly to the
automobile industry as well as in those industries supplying goods and
services to automobile users.
The details of other Soviet plans to modernize and expand existing
plants and to construct other new plants for the automobile industry
have not yet been fully disclosed. Renault of France may sign an
agreement to enlarge the dilapidated and outmoded Moskvich plant.
Expanding this plant to a capacity of 200,000 automobiles per year
would be tantamount to building a new plant and would cost ap-
proximately $190 million. Renault might follow its previous practice
in dealing with Communist countries and reduce costs by supplying
used equipment from its French plants.
In addition, the USSR is preparing to start production of Moskvich
automobiles in Izhevsk in the western Urals. This plant will require
an additional investment of about $130 million before the proposed
capacity of 100,000 units can be reached. The USSR probably 'will
also increase automobile production in its Gor'kiy and Zaporozli'ye
facilities by a total of about 86,000 units per year between 1966 and
1975, requiring about $122 million more in new investment.
Soviet, Italian, Western European, and US Participation in the Estimated
Costs of the Fiat Plant to be Constructed in the USSR
Building (all to be supplied by the USSR) .............................. 167
Machinery and equipment 355
............................................
Supplied by Fiat from Italian, Western European, and US sources ....... 255
Supplied by the USSR ........................................... 100?
Other supporting facilities e ......................................... 278
Supplied by Fiat ................................................ 65
Supplied by the USSR ............................................ 213
Total cost of Fiat plant .............................................. 800
Total supplied by the USSR ...................................... 480
Total supplied by non-Soviet sources . ............................. 320
Italy ............................................ 195 to 235'
Other Western European ......................... 40 to 90
United States ................. .................. 30 to 50
Some commentators have suggested that the USSR would supply no equipment. It is
most unlikely, however, that the USSR, with the world's largest machine tool industry, would
not participate in equipping such a plant.
h Other supporting facilities include costs of external transportation connections; Fiat-supplied
training, engineering, plant layout, and powerplant; and plants for paint, gaskets, nuts, bolts,
radiators, and other assorted hardware.
`Midpoint of the range.
'Including an engineering fee of $65 million.
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V. Secondary Investment
A. INTRODUCTION
The production of from 7 million to 9 million automobiles annually
in the United States affects virtually every branch of US industry.
One out of every seven wage earners is connected with some phase of
the automobile world. One out of every six businesses in the United
States depends on the manufacture, distribution and servicing, or use
of motor vehicles. Automobile, truck, and bus production in the
United States in 1963 accounted for the following shares of various
materials:
Percent of
Material Domestic Production
Domestically consumed steel ....................................
23
Cold rolled sheet and strip ......................................
46
Gray iron castings ....... .....................................
19
Malleable castings .............................................
57
Natural rubber ................................................
65
Synthetic rubber ..............................................
60
Nickel .......................................................
14
Zinc .........................................................
35
The automotive support industries-fuel, accessories, and the like-
have grown rapidly in the United States and now almost equal one-
half of the value of retail sales of new automobiles, as shown in the
following tabulation:
Million US $
Automobiles ....................................................
46,000
Tires, batteries, and accessories .................................. . .
2,900
Gasoline, repair, and maintenance ..................................
20,000
Total ......... ........ ......................... ...............
88,900
In the USSR, in contrast, automobile production has little impact
on industrial production. In 1959, total production of motor vehicles
(automobiles, trucks, and buses) used less than 4 percent of the gross
value of the output of ferrous metals. The share of inputs consumed
by the motor vehicle industry in 1959 is shown in the following
tabulation:
Percent of
Material Gross Output
Ferrous metals ..................................................
3.4
Nonferrous metals ................................................
3.8
Metal products (nuts, bolts, and the like) ...........................
3.8
Glass ..........................................................
1.6
Bearings ........................................................
11.1
Tools and instruments ............................................
1.2
Electrotechnical (generators, electric motors, batteries, and the like) ....
1.0
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B. FERROUS METALS REQUIREMENTS
In view of planned increases in iron and steel production, auto-
mobile production will not significantly increase its claim on total
Soviet output of ferrous metals through 1975 (see Table 6). The
Soviet metallurgical industry, however, will have some problems in
producing steel products according to specifications in all the required
shapes and grades. The metallurgical industry must supply the auto-
motive industry with substantially increased quantities of cold rolled
sheet, bars, pipe and tubing, various shapes or profiles, plates, cold
finished bars, and tubes.
Production of Selected Ferrous Metals and the Share Required
for Production of Automobiles in the USSR'
1965, 1970, and 1975
Share.
Share
Share
Ferrous
Required
Ferrous
Required
Ferrous
Required.
Metal
for
Metal
for
Metal
for
Pro-
Auto-
Pro-
Auto-
Pro-
Auto-
duction
mobile
duction
mobile
duction
mobile
(Million
Pro-
(Million
Pro-
(Million
Pro-
Metric
duction
Metric
duction
Metric
duction
Tons)
(Percent)
Tons)
(Percent)
Tons)
(Percent)
Castings .......... 16.5
0.2
24
0.4
31
0.8
Gray iron and mal-
leable ........
12.6
0.2
17
0.4
22
0.8
Steel ...........
3.8
0.02
6
0.03
9
0.05
Rolled steel .......
70.9
0.3
97b
0.5
125
0.9
Cold rolled sheet ...
3.6
3.3
7
4.5
12
6.7
'Excluding production of spare parts. Because of rounding, components may not add to
the totals shown.
Midpoint of the range of 95 million to 99 million tons.
The USSR has encountered particular difficulty in expanding the
output of cold finished steel products. Soviet production of 3.6 mil-
lion tons* of cold rolled sheet in 1965 was far less than the target
figure of 6.5 million tons. Because of the lag in the production of
cold rolled steel, the USSR has been negotiating since mid-1965 with
manufacturers of metallurgical equipment in several Western countries
to buy a cold rolled sheet plant. One possible transaction, estimated
at about $190 million,** calls for the annual production of 600,000 to
800,000 tons of cold rolled steel-enough steel for 1 million auto-
mobiles and several million washing machines and refrigerators. Such
a plant would increase Soviet production of cold rolled steel by 17 to
* Tonnages are given in metric tons.
** Including the cost of equipment to roll tin plate and galvanized sheet and estimated
building costs.
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22 percent. The USSR has manufactured several continuous cold
rolling mills, but the mills are much less advanced technologically
than those available in the industrial West. The USSR recognizes
that Western builders could supply a technologically superior cold
rolling mill at less cost and with less delay than could Soviet industry.
C. MACHINE TOOLS
The need of the Soviet automobile industry for dependable high-
performance specialized machinery is a key reason why the USSR has
turned to the industrial West to equip its new plant. Soviet machine
tool builders have always emphasized long production runs of gen-
eral-purpose machine tools that are often used instead of more expen-
sive specialized machine tools in Soviet industry. Consequently, the
USSR has inadequate capacity for manufacturing complex, specialized,
and highly precise machine tools. In addition, the USSR recognizes
the absolute cost and quality advantages that the industrial West has in
the production of automotive machine tools. The USSR, however,
can be expected to produce domestically most of the required equip-
ment of a nonspecialized nature for its expanding automobile industry.
As more automobiles are produced, specialized machinery will be
needed for continuing new investment, replacement, and automotive
support industries, and, therefore, it will become more profitable for
the USSR to produce domestically more of the specialized equipment
required by its automobile industry. Thus expanded automobile out-
put probably will have a greater effect on the Soviet machine tool
industry after 1970.
D. TIRES
The new five-year plan for tire production in the USSR calls for a
production increase by 1970 roughly equivalent to the increase
achieved in the seven-year period 1959-65. Output of tires (26.4
million in 1965) is scheduled to rise to between 38 million and 40
million by 1970. Automobile tires will probably account for a grow-
ing percentage of total tire output-the estimated production for
1966 and 1970 compared with 1960 follows:
1960
....................... ....................
2.2
1966
............................................
4.0
1970
............................................
7.0
At least four new Soviet tire plants are to be built in 1966-70, and
a number of existing plants are to be expanded. The capacities of
the new plants will be on the order of 2 million to 3 million tires each,
although at least some of these plants will not reach full operation
until after 1970.
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The increase in tire plant capacity will cost about $40 million. Ad-
ditional supporting investment in carbon black, tire cord, and synthetic
rubber production could boost total investment $100 million more
for 1966-70.
E. GASOLINE
The additional requirements for motor gasoline through 1975 will
place no special burden on the petroleum industry, which by :1975
may be outproducing the United States in crude oil. The industry,
however, will have to emphasize more the production of gasoline
in the higher octane ranges-72 octane and above. At present, the
USSR produces about 5 million tons per year of such gasoline----17
percent of the total gasoline yield. If the production of crude oil
continues to grow through 1975 at the rate planned for the next five
years, as much as 75 million tons of motor gasoline may be produced
in 1975, of which about 37 million tons could be of high octane. By
contrast, the additional automobiles that are to be on the road in 1975
(excluding trucks and buses) will need only about 4 million tons per
year of high-octane gasoline.
One refinery with a capacity of 12 million tons could produce the
required 4 million tons if oriented toward that goal. Such a refinery
might cost between $290 million and $360 million, of which no more
than $100 million would be assigned to provide the facilities required
to produce the high-octane gasoline.
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VI. Tertiary Investment
1. Introduction
The USSR will almost certainly have no desire and little need to
duplicate in the foreseeable future the heavy tertiary investments
that have been fostered by the automobile in Western Europe and
the United States. Plans thus far released for the period through
1970 indicate that Moscow has felt under no compulsion to accelerate
basic highway construction, much less construction of service stations
and motels. Soviet planners have long believed that a well-developed
railroad system best suited the USSR's needs for hauling freight. Al-
most all large industrial plants in the USSR are served by railroad
sidings that provide door-to-door rail service. Trucks have been used
in the USSR primarily for short-haul intracity shipments, and no
change in this pattern is discernible.
2. Highways
As a result of the emphasis on railroads and the vast size of the
country, only a rudimentary highway network exists in the USSR.
Of 1,340,000 kilometers of roads in 1964, only about 350,000 kilometers,
or about one-fourth, was surfaced in any way, and less than 120,000
kilometers, about 9 percent, was paved with concrete or asphalt. The
length of paved roads in the USSR about equals the paved highway
system in the state of Michigan. The historic backwardness of the
Soviet highway system is illustrated in Table 7, which compares the
length of Soviet and US highways for selected years.
During 1960-64 about 20,100 kilometers of surfaced highways,
including 10,600 kilometers of paved highways, were built annually
in the USSR. By contrast, the United States built over 32,000 kilo-
meters of major (Federally-aided) highways in 1964.
As shown in Figure 3, Soviet highway construction has not ac-
celerated in recent years, and no dramatic changes are expected in the
expansion of the Soviet highway network during 1966-70. The new
five-year plan (1966-70) calls for the construction of 63,000 kilo-
meters of paved roads, an increase of about 20 percent over the length
of roads constructed in the five-year period 1960-64. There will be
some increased emphasis on construction and reconstruction of badly
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Table 7
Length of Highways in the USSR and the United States
1940, 1950, and 1960-64
Thousand Kilometers
Percent Percent
Total ? Total Paved Surfaced Total Surfaced Surfaced
1940 ........ 1,531 143 7 9 4,855 2,200 45
1950 ........ 1,550 177 19 11 5,322 3,121 59
1960 ........ 1,368 271 77 20 5,707 4,147 73
1961 ........ 1,336 290 87 22 5,750 4,165 72
1962 ........ 1,336 311 97 23 5,794 4,260 74
1963 ........ 1,332 330 108 25 5,826 4,334 74
1964 ........ 1,340 352 118 26 5,864 4,394 75
` Public roads under jurisdiction of highway departments.
b Rural, state, municipal, and county roads.
Including gravel surfaced roads.
'The reduction in the total is due to decreased importance of some dirt roads.
needed rural (farm-to-market and railhead) roads. Some important
intercity highways will be completed or improved during 1966-70,
including the Moscow-Bryansk-Kiev highway, the Moscow-Tambov-
Volgograd highway, and the Moscow-Kuybyshev-Ufa highway. Most
of Central Siberia and the Far East, except for short stretches in the
vicinity of, the major population centers, will remain completely with-
out a system of paved roads.
Despite the secondary importance of highways in the USSR,. the
vastness of the country, combined with the past neglect of the high-
way system, means that significant investment allocations are required
even for a fairly minimal expansion effort. This conclusion is sup-
ported by the following estimates of the annual cost of new construc-
tion in the USSR for 1966-70:
Annual Cost
(Million US $ )
Paved ........................................ 840
Other hard surfaced highways .................... 400
Total ....... .............................. 1,240
By contrast the United States awarded $5.04 billion in contracts for
new highway construction in 1965, and contracts for 1966 will total
approximately $6 billion.
3. Service Stations and Garages
Automotive service facilities in the USSR are woefully inadequate,
nor is there any indication that the regime intends to improve this
situation in the immediate years ahead. In Moscow there are eight
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z
o a
A
,o
.0 a
0.
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gasoline stations and eight garages, only three of which service all
makes of Soviet automobiles. In Leningrad there are three gasoline
stations and only one garage. Outside the major cities, service sta-
tions and garages are even harder to find, as shown in the tabula-
tion below:
Route
Distance
(Kilometers)
Gasoline
Stations
Garages
Moscow-Minsk
...........................
705
5
1
Moscow-Leningrad ........................
724
5
2
Moscow-Khar'kov .........................
734
7
2
Moscow-Gor'kiy
..........................
995
3
0
Khar'kov-Kiev
............................
478
3
1
Moscow-Kalinin
..........................
161
0
0
In contrast to the 211,000 gasoline stations in the United States,
which perform necessary economic functions, especially with respect
to maintenance and repair, the total number of stations in the USSR
in 1963 was 1,500 to 1,600. If the present ratio of automobiles to
filling stations is maintained, during 1966-75 the USSR would have
to build additional filling stations,* as indicated in the following
tabulation:
Number
Equipment
Cost
Total Cost
1966-70
...............
1,300
6,500
22,100
1971-75
...............
4,800
24,000
81,600
Total
...............
6,100
30,500
103,700
The USSR has not announced any plans for expanding repair facili-
ties, but some indication that the plans are quite modest in scope was
suggested by a recent news item in a Moscow newspaper which stated
that during the next five years two service facilities, each capable of
handling 12,000 vehicles annually, will be built. In addition, an
unspecified number of other repair facilities will be built, with a total
capacity of only 72,000 vehicles annually. The following tabulation
gives estimates of the additional number of garages likely to be built
in the next 10 years":
Number
Equipment
Cost
Total Cost
1966-70
...............
430
4,300
15,000
1971-75
...............
1,600
16,000
56,000
Total
................
2,030
20,300
71,000
* Estimated from the ratio of automobiles in use (844,100) to service stations (between
1,500 and 1,600) in 1963.
"Estimated Estimated from the ratio (1 to 3) of garages to service stations in the USSR in 1962.
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4. Social Considerations
Apart from these strictly economic considerations there are other
reasons for expecting the Soviet regime to move cautiously in encourag-
ing investments that would promote the expanded use of automobiles
beyond the city limits. For example, the USSR is one of the most
security conscious nations in the world and the movements of its
citizens are carefully monitored through a system of police registra-
tions. The regime probably would not be willing to accept the eco-
nomic and political costs of expanding such a system to manage the
major increase in mobility that would certainly follow an unrestricted
expansion of the facilities for long-distance travel. No matter how
appealing the prospect of suburban and rural living is to the Soviet
urbanite, presently confined to an inadequate city apartment, the
regime may be expected to resist a proliferation of private rural hous-
ing as both costly and poorly suited to the Soviet conception of the
social needs of its citizens.
B. THE EXPERIENCE OF THE UNITED STATES AND WESTERN EUROPE
1. The United States
The Soviet planner, even though intellectually committed to in-
creasing the importance of the automobile in the USSR, must look
with considerable trepidation at data that show how the US economy
was revamped by mass production and use of the automobile. After
the United States took to wheels, there was a vast inner migration
which led to modern multilaned highways, vast suburbs, and more
and more consumer durables. To support 82 million motor vehicles
(69 million automobiles and 13 million trucks and buses) in 1963,
the United States had the following:
Number
Sales
(Billion US $ )
Automotive wholesalers . .........................
22,883
6.7
Franchised automobile dealers .....................
33,349
37.4
Automotive repair ...............................
114,459
3.6
Gasoline service stations ..........................
211,473
17.7
A wholesale distributor of automobile parts-from tires to engine blocks.
It should be borne in mind, however, that the enormous investment
in superhighways and sprawling suburbs in the United States today
was not a feature of the US automotive history during 1910-20-the
time period most analogous to the present Soviet position (Phase A
in Figure 4). The mass-production age of automobiles began in the
United States in about 1910 (181,000 automobiles were produced
during that year). By 1912 the stock of automobiles totaled close to
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a million, about the same as the Soviet inventory today. By 1917 the
US stock had grown to 4.7 million automobiles; the USSR probably
will need 10 more years to increase its inventory by this amount. In
the 1910-20 period the US stock of automobiles increased annually
by an average of 33 percent, but total highway expenditures and the
total length of surfaced highways increased much more slowly (see
Figure 5). Total expenditures on roads increased 9 percent annually
and the length of surfaced highways 6 percent.
Highway construction in the United States has long received an
impetus from the growing requirements for both passenger and freight
traffic. The early urban car owner in the United States was anxious
to drive into the countryside, and the farmer pressed for farm-to-
market roads. But it was not until about 1946 that the United States,
having a stock of nearly 30 million automobiles and having been re-
leased from the pressures of war and depression, substantially acceler-
ated tertiary investment and entered the Phase C of the automobile
age, as described in Figure 4. The long-run relationship between the
stock of automobiles and highway expenditures in the United States is
shown in Figure 6.
More specifically, not until 25 years after the United States had left
Phase A-the phase that the USSR is just now entering-did the US
automotive age finally induce greater increases in service facilities,
superhighways, modern motels, supermarkets, shopping plazas, and
the mass migration to the suburbs. Although the dispersal of the
population from the central city has been underway in the United
States since the turn of the century, the major trend toward suburban
development has taken place since World War II. In the last decade,
more than three-quarters of the new dwelling units, measured by value
or number, in the major metropolitan areas were constructed outside
the central cities.
2. Western Europe
Western :Europe, which had only a motorbike toehold in the auto-
motive age in the early 1950's, has in recent years become a full mem-
ber with all attendant pleasures and problems. Both production and
stock have increased rapidly, as shown in the tabulation below:
Million Automobiles
Production
Stock
1950
...................................
1.1
6.0
1962
...................................
6.7
27.8
1964
...................................
7.0
35.1
The annual rate of growth of the stock of automobiles in Western
Europe has averaged 13 percent from 1950 through 1964, a higher
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 Approved For Release 2004/05/05 : CIA-RDP69B00369R000100240112-5 Figure 5
UNITED STATES AND WESTERN EUROPE: COMPARATIVE INDEXES
OF AUTOMOBILE STOCK AND HIGHWAY EXPENDITURES
1,000
900
800
700
100
PERCENT
500 -
1910-20 and 1955-64
UNITED STATES
1910 = 100
AUTOMOBILE STOCK
1910 458,377 units -?
1920 8,131,52.2 units
!EE I
I i
TOTAL HIGHWAY EXPENDITURES
1910 $ 275 million
1920 $ 633 million
LENGTH OF SURFACED HIGHWAYS
1910 328,000 kilometers
1920 594,000 kilometers
AUTOMOBILE STOCK
1955 11.8 million units
1959 1960 1961 1962 1963
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z
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growth rate than GNP, which rose at an average annual rate of about
9 percent (in current terms).
In the past decade Western Europe has devoted, as shown in the
tabulation below, an increasing share of its resources to the develop-
ment of roads and highways.
Total Highway
Expenditures
(Billion US $)
Percent
of GNP
1956
...... .......... ............ 2.0
0.8
1964
.............................. 6.3
1.4
1970
.............................. 9.7
2.0
' Estimated by the International Road Federation.
Yet, despite the rapid increase in highway expenditures in Western
Europe and the present existence of about 5 million kilometers of roads,
the present highway system is considered inadequate for the traffic
it must bear. The turnpike or thruway is virtually unknown in Europe
outside Germany. In France in 1964 there were only 348 kilometers
of such superhighways. The heavy investments in bypasses, free-
ways, and beltways are yet to be borne by most of the countries of
Western Europe. As shown above, Western European highway ex-
penditures as a share of GNP have increased but are still significantly
lower than in the United States.*
Western European experience indicates, as does US experience, that
a widespread increase in automobile ownership eventually induces
large amounts of other tertiary investments. Much of this invest-
ment-restaurants, motels, service stations, and shopping centers-
caters to the increased mobility given the population by the auto-
mobile. Much of the investment in public works-cloverleafs, turn-
pikes, and freeways-is required when the density of automobile
traffic threatens to destroy the very mobility that the automobile has
introduced. The United States today is becoming increasingly aware
of the major investments and revamping of cities and countrysides
that are needed to live with the automobile. Western Europe is well
into the automobile age, entering Phase C (see Figures 4 and 5),
but has not yet completely faced up to the heavy investments needed
to live with the automobile.
Ultimately the Soviet economy may have to pay the costs-the super-
highways and underground parking-of enjoying the convenience
of the automobile. Western experience, however, shows that it will
be decades before the automotive expansion forces the Soviet economy
to cater to the induced investment engendered by the automobile
rather than the preferences of the hierarchy.
* By contrast? highway expenditures in the United States for the past decade have con-
sistently been about 2.2 percent of GNP.
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