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Increasing in affluence, the Azerbaijani population is driving the growth of the luxury car market, while it looks to establish itself as a manufacturing hub in the region through targeted FDI.

Although the auto market suffered slightly over the global economic crisis, Azerbaijanis are increasingly dipping into their pockets and purchasing increasingly sophisticated and luxury vehicles. In parallel, recent years have seen the beginnings of an assembly industry, as Iranian firm Iran Khodro and Chinese Lifan have begun production in the country. The luxury car market has moved away from its gray-market origins, as brands such as Bentley, Porsche, BMW, and Mercedes-Benz have become well established across the country, and begun achieving impressive sales figures in a nation that had built-up hunger for not only varied choice but also the customer-focused services unavailable on the gray market. “Services are a true strength of Mercedes in Azerbaijan. Our workers are well trained and very experienced,” commented Yoahim Traenkle, General Director of Mercedes-Benz in Azerbaijan, to TBY in an interview.

Emin Asgarov, General Manager of Bentley Baku, also told TBY that there were already 50 Bentleys in the country even before the company established itself officially in 2010. Sales have also begun positively, “We planned to sell 17 cars per year, and we sold 23. The market in Azerbaijan is ready to see luxury car brands develop as the general economy is booming,” Asgarov commented. BMWs and Porsches are also an increasingly common sight on the streets of Baku, and “it is also possible to find exotic brands such as Maserati, but this brand is imported on an individual basis”, Traenkle told TBY.

Rising in tandem with the luxury car market is the assembly industry, although it remains in its embryonic stages compared with regional neighbors Turkey and Iran. It is Iranian firm Iran Khodro, in fact, which established an assembly facility with a capacity of 5,000 units per year recently, and in early 2011 production of Peugeot 206 vehicles began at the facility after an upgrade. Chinese car and motorcycle manufacturer Lifan’s facility was opened in 2010 in the Azerbaijani exclave of Nakhchivan, and has a capacity of 4,000-5,000 units per year. In a move seen as hugely positive for Nakhchivan, Lifan services both the local market and surrounding markets from its facility, in a similar strategy to Iran Khodro. In addition, Ganja Motor Works produces trucks and tractors.

Barriers to further growth in Azerbaijan’s car market are infrastructural, and the luxury car market is set to see a slowdown as the market becomes saturated. “The sector will not see year-on-year growth forever, as there is somewhat of a limit to the number of products that we can sell,” Traenkle told to TBY. Furthermore, Asgarov commented that, “The most important issue is that the infrastructure is not ready for super cars like Ferraris and Lamborghinis; once roads and highways are in a good state of repair, I think that we will see more and more of such cars”

However, as the infrastructure improves with focused government attention, it seems likely that both auto assembly and the luxury car market will continue their upward path.