CURRENT INTELLIGENCE WEEKLY SPECIAL REPORT IMPACT OF THE SOVIET AUTOMOBILE PROGRAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A005300110002-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 19, 2016
• Document Release Date: May 17, 2006
• Sequence Number: 2
• Publication Date: July 8, 1966
• Content Type: REPORT

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IMPACT OF TIE SOVIET AUTOMO13IL] P OG M,
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IMPACT OF THE SOVIET AUTOMOBILE PROGRAM
One of the most interesting features of the
Soviet five-year plan for 1966-70 is the approxi-
mately fourfold increase called for in the annual
production of passenger cars--the stated target
for 1970 is 700,000 to 800,000 units. The impor-
tance the post-Khrushchev regime attaches to this
goal is underscored by the 4 May 1966 contract
with Fiat of Italy. The plant to be built under
this deal will be capable of producing 600,000
cars a year, but the time involved in its construc-
tion will probably postpone realization of the 1970
output goal until 1972.
The average annual rate of increase in au-
tomobile production between 1966 and 1970 that
is implied by the five-year plan is 28 to 32 per-
cent. In contrast, the production of passenger
cars grew by an average of only 8 percent annu-
ally between 1961 and 1965. Also, the total num-
ber of cars produced annually in the USSR has al-
ways been well below the comparable figure for
trucks, but the reverse will be true when the 1966-
70 plan is fulfilled. The individual consumer
will still come last with only about 40 percent
of all the cars allocated to the private sector
through 1969. By 1975, however, almost 60 per-
cent of new Soviet automobiles will be for pri-
vate purchase.
The automobile target for 1970 will not re-
quire significant alterations in, the USSR's other
economic programs because the costs of the auto-
mobile program will be only a fraction of over-
all industrial investment during 1966-70. The im-
pact on the defense industry will be negligible;
indeed, the automobile program will complement
defense requirements by providing reserve produc-
tive capacity. The program will undoubtedly gen-
erate new investment in addition to that required
for new or renovated automotive plants, but it ap-
pears certain that the Soviet regime does not now
envision the development of a motor-oriented so-
ciety typical of the US and other Western coun-
tries.
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Table 1.
PRODUCTION AND AVAILABILITY OF
AUTOMOBILES IN SELECTED COUNTRIES, 194
Automobiles in Use
Per Million Population'
Production
Automobiles in Use"
High Automobile Use
Countries
United States
375,000
7,745,492
71,950,000
Canada
265,000
560,678
5,122,000
Australia
234,000
340,614
2,599,000
Sweden
217,000
160,106
1,666,000
France
164,000
1,390,312
7,960, ODD
United Kingdom
156,000
1,867,640
8,436,000
West Germany
144,000
2,650,183
8,100,000
Low Automobile Use
Countries
Italy
90,600
1,028,930
4,632,000
South Africa
58,500
143,373
1,023,000
Argentina
36,400
114,617
800,000
Belgium
21,400
327,899
201,000
Spain
20,800
119,000
652,000
Japan
17,300
579,660
1,672,000
U.S.S.R.
4,000
185,200
919, ODD
Based on population at midyear rounded to three significant digits.
Based on automobile registrations except for USSR, which is estimated.
The Auto in Soviet Society
The USSR's belated entrance
into the automobile age will
mark an important turning point
in the course of Soviet economic
development. Production of pas-
senger cars in the USSR has in-
creased gradually from 50 in 1928--
a year that saw nearly 4 million
automobiles roll off Detroit's
assembly lines--to 201,200 un-
its last year. Compared with
demand and production in other
countries, the USSR's 1965 level
of output is minute (see Table 1).
According to present plans,
there will be about 16,600 au-
tomobiles per million popula-
tion in the USSR by 1975. This
will be a considerable improve-
ment over the present, but it
will still be lower than
the 1964 level in any
of the countries listed
in Table 1. Moreover,
the portion of the USSR's
new cars put to admin-
istrative and military
use or exported during
the coming decade will
decline only from the
present 60 percent to
about 40 percent in 197.5.
industry is the result
of policy decisions made
by Stalin and carried
on by Khrushchev. Khru-
shchev often said that
the mass production of
passenger cars for pri-
vate use was a "weakness"
of capitalism that the
USSR would avoid. A highly
The slow develop-
ment of the Soviet auto
developed rail system was to
be the major carrier of freight
and interurban passengers with
public transport, taxis, and
car rentals taking care of city
traffic. The partial failure
of this system, together with
such considerations as the need
for greater personal incentives
and a means to absorb excess
purchasing power, underlies the
reversal of the traditional So-
viet position on automobiles.
Premier Kosygin has been
the most explicit spokesman for
increased automobile production.
His reasoning, as expressed pub-
licly, indicates that simple
cost calculations entered into
the decision to step up the out-
put of passenger cars during
the next ten years. In March
1965, for example, Kosygin said:
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ESTIMATED AUTOMOBILE PRODUCTION, INVENTORY, AND DISPOSITION IN THE USSR
Thousand Units
Table 2: PRODUCTION$1966 1967 1968 1969 1970 1971 1972 1973 1974 1975
Volga 56 58 60
63
66
70
75
80
85
90
Moskvich 74 83 88
90
100
120
140
160
180
200
Zaporozhets 48 57 67
76
84
90
95
100
100
100
lzhevsk 0 8 30
50
80
100
100
100
100
100
Fiat 0 0 0
5
100
250
400
500
600
600
TOTALL 206 234 273
312
458
658
838
968
1,093
1,118
Table 3: INVENTORY
Starting Inventory 1,004 1,085 1,180
1,298
1,436
1,676
2,051
2,534
3,078
3,676
Production 206 234 273
312
458
658
838
968
1,093
1,118
Imports-2 2 2 2
2
2
2
2
2
2
2
Exports SL 47 54 63
72
105
151
193
223
251
257
Scrappagerfi 80 87 94
104
115
134
164
203
246
294
Year-End Inventoryf 1 085 1,180 1,300
1,440
1,680
2,050
2,530
3,080
3,680
4,250
Table 4: DISPOSITION OF NEW AUTOMOBILES
Production
206 234 273
312
458
658
838
968
1,093
1,118
Exports
47 54 63
72
105
151
193
223
251
257
Imports
2 2 2
2
2
2
2
2
2
2
Official,Military,and
Commercial Use
77 87 102
116
156
204
233
239
236
207
Private Use$
84 95 110
126
199
305
414
508
608
656
a. 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.
b. Including production of 100 ZIL-111s, 200 Chaikas and 28,000 GAZ 69s annually.
c. Assuming a constant 2,000 units,
d. Assuming a constant 23 percent of production, from the some level 1961-1964.
e. Assuming a constant 8 percent of starting inventory.
f. Figures may not total because of rounding.
g. Assumed to be a constant 52 percent of the figure arrived at when exports and imports are netted out of production through years 1966-
1969. After 1969 the figure increases by 4 percent per year, reflecting a larger share of automobiles available to private individuals.
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You know-how staunchly
the idea was imposed that
there was no necessity
in our country to develop
the production of pas-
senger 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....
The result has been that
many leaders have been
compelled to use trucks
unlawfully for their of-
ficial rides. An appar-
ent saving was made on
transport costs, but in
fact damage was inflicted
on our economy....
This rationale for the new
emphasis on automobiles also in-
dicates that private individu-
als will continue to be at the
bottom of the priority list for
new cars. Demand by individu-
als even now far outstrips sup-
ply, and there is little pros-
pect that this situation will
be changed, at least until well
into the 1970s.
Prospective Production and
Inventory
Table 2 shows estimated an-
nual production of Soviet auto-
mobiles through 1975. More than
half the cars produced in 1975
are expected to come from the
Fiat plant, which will probably
not be operating at designed ca-
pacity until 1974 (see Figure 1)..
This is the major factor in the
estimate that the 1970 automo-
bile target contained in the
1966-70 plan will not be reached
until 1972. A new, smaller plant
at Izhevsk to be constructed
with domestic resources will
begin production on a token scale
this year, but will accelerate
its level of output rapidly un-
til 1971 when it probably will
be operating at full capacity.
The older and, in many
re-
spects, outmoded facilities
pro-
ducing the
Moskvich, Volga,
and
Zaporozhets
automobiles are
to
be expanded
and modernized.
The
inevitable
delays and disrup-
tion involved in retooling these
plants will also contribute to
postponing the 1970 goal until
1972. Capacity now employed
in producing the prestigious
Zil-111 and Chaika models as
well as that used for manufac-
turing the jeep-like GAZ 69 will
not be enlarged, according to
present plans.
The total stock of public
and privately owned automobiles
in the USSR is now estimated
at slightly more than one mil-
lion. This is comparable to
the number of car-s in the Re-
public of South Africa in 1964,
or in Kentucky in 1965. An in-
ventory of two million cars will
probably not be reached before
1971, and the total stock avail-
able in 1975--more than four mil-
lion units--will be only about
half the number of automobiles
now in California (see Table 3).
The serious shortcomings
in service outlets and spare
parts will continue to reduce
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ESTIMATED CONSTRUCTION TIME SCHEDULE
OF FIAT PLANT
Excavation and Foundation
Preparation, Utilities
Clearing, Drainage,
Access Roads
Design, Planning,
Engineering
Site
Selection,
Preliminary
Survey
HYPOTHETICAL RELATIONSHIP BETWEEN STOCK OF
AUTOMOBILES AND SUPPORTING INVESTMENT
.0-000 00000 .'mom
Regular
Production
PHASE C: Congestion: superhighways,
cloverleafs, garages, and relatively
more service and gas stations accelerate
supporting investment requirements.
PHASE B: Intercity: the period of the
two-lane road, grade-crossings;
supporting investment increases at
about the same rate as stock of
automobiles.
Initial
Production
and
Checkout
Road
Paving
SUPPORTING INVESTMENT
(BILLION $) 10-90
PHASE A: Urban: automobiles use
existing urban streets or limited
number of interregional highways.
Now
Full Capacity
1974
PHASE D: Saturation: rebuilding cities,
inner and outer loops, and under-
ground parking.
STOCK OF AUTOMOBILES
(MILLION UNITS)
YEARS
The overall shape of the supporting investment curve will be dependent on the total area and
population of the country, its geography, and distribution of automobiles between rural and
urban ownership. Present Soviet plans still place the USSR within PHASE A. Western Europe
is entering PHASE C. The US as a whole is within PHASE C, but parts of the East Coast of the
US are within PHASE D.
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considerably the actual number
of automobiles operable at any
given time in the USSR. About
one fifth of the present inven-
tory--or approximately 200,000
cars--is believed to be out of
service on a regular basis await-
ing repairs. This is roughly
the total number of automobiles
produced in the USSR in 1965,
the best year in the Soviet au-
tomotive industry. The servic-
ing problem, furthermore, is not
expected to improve appreciably
during the coming decade, and
it could even deteriorate as pro-
duction accelerates in the 1970s.
dustry and only four or five
percent of estimated investment
in the machine-building sector
anticipated during 1966-70. This
sum can clearly be allocated
without involving a major shift
in other investment plans--such
as the agricultural recovery
program--or cutting back on any
of the present and prospective
military and space programs.
The favorable terms of the Fiat
contract, furthermore, will spread
the repayment burden over eight
years beginning in 1971.
Other Costs
The number of automobiles
available to the individual con-
sumers is expected to increase
more than sevenfold between 1966
and 1975, yet new cars reaching
the private sector in the final
year will be only slightly more
than half a million (see Table 4).
Direct Investment
The 1975 production level
of 1.1 million cars will neces-
sitate an estimated $1.2-billion
investment in new buildings, equip-
ment, and directly associated
support facilities. Two thirds
of this will be for the Fiat plant,
with the remainder to be allo-
cated for renovating old facil-
ities and installing new capac-
ity.
Soviet production plans im,
ply that about $900 million of
the $1.2-billion total will have
to be spent by 1970. While sub-
stantial, the $900-million fig-
ure nevertheless represents only
one half of one percent of the
total investment in Soviet in-
A number of Soviet indus-
tries will have to increase their
production of materials, met-
als, and equipment needed by
the expanding automobile indus-
try. However, this will impose
little strain on the USSR's in-
dustrial capacity, which will
be growing during this period.
In sharp contrast to the US, more-
over, where about one quarter
of the steel produced annually,
60 percent of the rubber, and
35 percent of the zinc go to
the motor vehicle industry, in
the USSR such percentages are
extremely small except for rub-
ber and bearings. Even in these
items the comparable figures
are well below those for the
US or other countries with a
developed automobile industry.
On the basis of the US ex-
perience, the Soviet automobile
"aftermarket"--gas, tires, bat-
teries, accessories, repair,
and maintenance--could grow to
as much as one half of the value
of new car sales annually. The
distortions in Soviet prices,
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VOLGA- Largest car available to the public;
retail price $6,000 plus.
MOSKVICH 408-
Popular model of the
Moskvich line; retail price
about $5,000.
ZAPOROZHETS- Smallest and most unpopular
Soviet car; retail price about
$1,500.
FIAT 124- Comparable to the Moskvich 408;
a likely choice for the Fiat plant.
Prestigious models produced in limited quantities
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particularly the very high re-
tail cost of new automobiles, makes
this comparison with the US some-
what inexact, but it is obvious
that the output of such products
and servicing facilities will
have to keep pace with the growth
of the USSR's stock of automo-
biles. The number of gas sta-
tions, garages, and repair shops
in the USSR today is barely ad-
equate to handle the requirements
placed on them by the small num-
ber of Soviet cars now on the
road.
Expansion of the Soviet au-
tomobile industry will involve
more than direct and associated
costs. In return for these out-
lays the USSR will acquire an
industry that has traditionally
been a powerful stimulus for tech-
nological progress in a variety
of industrial sectors. This in-
dustry has consistently demanded
advanced technology, high pro-
ductivity, and the utmost in de-
pendability in the machinery and
equipment it purchases. Aside
from the credit considerations,
the Fiat deal points up how de-
ficient the USSR is in this re-
gard. Stated simply, the fact
is the Soviets had to go abroad
if they wanted to expand their
automotive industry rapidly. The
rumored contract with Renault
to modernize the Moskvich plant
is another case at point.
Ramifications
Although the USSR is com-
mitted to the rapid expansion
of its automobile industry, it
is clear that Moscow does not
at this time intend to allow the
development of a motorized soci-
ety characteristic of the US and
most of Western Europe. The US
inventory of more than 70 mil-
lion cars and 13 million trucks
and buses generates almost $70
billion annually in sales, re-
pair, and servicing. One out
of every seven wage earners is
in some way employed by the US
automobile industry, and expend-
itures on increasing the present
US network of more than 2.7 mil-
lion miles of surfaced highways
are accelerating. In contrast,
only 9 percent, or 73,500 miles
of the USSR's 832,000 miles of
roads in 1964 were paved. No ma-
jor roadbuilding program is planned
during 1966-70.
In the US, the passenger
car has permitted a vast inner
migration which has opened up
the cities and brought the coun-
tryside closer than in any other
country. As Figure 2 shows, the
costs involved in supporting this
development begin accelerating
once phase C is reached. This
phenomenon will exert powerful
pressure on the Soviet planners
to restrict the effects of their
decision to enter the automobile
age. Potential repercussions in
the social and political spheres
will also lead the USSR to pro-
ceed slowly in developing even
a partially motorized society.
With the increased mobil-
ity afforded by the automobile,
the USSR will have to revise its
system of internal security. At
present a series of restrictions
and registrations governs the
travel of all citizens outside
their home city or rural area.
Such a system has been workable
as long as trains and planes are
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the major carriers, but it is
apparent that the increasing own-
ership of private automobiles
will inject a new and at pres-
ent perplexing element into the
security system.
More cars will also increase
smuggling, peddling, and black-
marketeering in the USSR. These
are already serious problems due
to the poor quality, amount,
and assortment of consumer goods,
the existence of regional price
differentials, and the avail-
ability of subsidized transpor-
tation to take advantage of them.
These activities, furthermore,
are more odious in the Soviet 25X1
Union than elsewhere because
they are thought to arise out'of
the failings of capitalism.
(Prepared by the Office of Research and Reports)
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