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Russia's car industry has been one of the hardest-hit sectors during the crisis - car output in Russia dropped 80% in January - but the Alabuga special economic zone (SEZ), located in the Republic of Tatarstan, is pressing ahead with plans to further develop the area as an automotive cluster. The authorities plan to establish by 2010 an automotive components industrial park in the Alabuga SEZ, which occupies 20 square kilometres (sqm) of land where investors have access to ready-to-use land plots at typically low prices and all the necessary industrial infrastructure already exists. The industrial park of 70,000 sqm will provide small and medium-sized auto component manufacturers with an already well-developed industrial infrastructure and all the necessary utilities.

The industrial park will help serve the two carmakers already operating there: Sollers-Elabuga, which manufactures various modifications of FIAT automobiles, and Sollers-Isuzu, which produces Isuzu trucks. The firms, two of eight companies currently operating in the SEZ, were attracted to the site because it's located in the centre of the Povolzhsky automotive cluster - one of Russia's largest such clusters. Most of Russia's major carmakers - namely AvtoGaz, GAZ, UAZ, Kamaz and IzhAvto - are located within a 500-kilometre radius of the Alabuga SEZ.

The SEZ also gives investors preferential tax and customs regimes. Property, land and transportation taxes are zero, while the tax on profits is just 15.5%. A free customs regime allows the importation of modern, high-tech equipment to the SEZ territory with no payment of import duty tax or VAT.

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