Hitting the Highway

According to official statistics published in 2013, 3.7 million Kazakh citizens own vehicles. In the Astana region alone, there are more than 380,000 registered vehicles, meaning that one out of five citizen owns personal transportation. In the same year, Kazakhstani citizens bought 163,000 vehicles, at a price tag of more than $3 billion, indicating sufficient demand to underwrite a massive consumer industry in a country of less than 18 million inhabitants. 75% of the cars in the country come from domestic or Russian manufacturers, and thus are not subject to an import tax. According to a report published by Autostat Analytic Agency in Nov 2014, for the first eleven months of 2014, the automotive market of the republic grew at a much slower pace than during the preceding years, only 0.3%. Of these sales, 139,520 were passenger cars.

During a round table dedicated to the development of the domestic automotive industry in October 2014, deputy Minister of Investments and Development of Kazakhstan, Albert Rau, stressed that the Ministry will render all the necessary support in bringing the key global automotive component manufacturers to the country’s market. The state policy in this area will be mainly focused on supporting all the projects aimed at large-scale production, increasing its localization level, and creation of a technical regulation infrastructure.

Easy credits for construction of workshops and creation of infrastructure, as well as reduced rate finance leases for purchase of technological, logistic, and ancillary equipment will be provided to enable further development in the industry. According to the government’s vision, Kazakhstan’s car making industry should see a boost in car production to 190,000 cars per year by 2019. This means that the car making industry will need to raise the number of cars from the current 37,000 to 190,000 new vehicles a year, with the share of locally produced parts from rising from the current 30% to 50%. Car exports should be raised to 30% by that time.

The main obstacle to the development of the domestic auto industry is the lack of productive enterprises and test databases for automotive components. Meanwhile, the major obstacle to export sales is the low level of localization. Under such circumstances, car manufacturers will need to pay special attention to the development of their component base. The ministry, through KazNexInvest, hopes to demonstrate the level of support necessary to attract the world’s major manufacturers of automotive components to Kazakhstan.

In this scenario Toyota Motor Corporation, headed by Etsuo Hashino, represents a success story in Kazakhstan. The Japanese company has recently announced the start of Complete Knock-Down production of the Fortuner SUV at the SaryarkaAvtoProm (SAP) production facility. The President of Toyota Motor Corporation commented on this milestone, telling TBY that “starting production of our new model, Fortuner, with a complete knockdown (CKD) production, is very important both for Kazakhstan and Toyota. We expect continuous growth in the market in Kazakhstan thanks to the strong fundamentals here, sustained by rich natural resources. We expect a continuous, growing demand, which is why we decided to start production of the new model. Kazakhstan, as a country, will be a great location to start the new project of CKD production. There are some other manufacturers who already started vehicle production here; however, it was just assembly. In our case, we have the production processes such as welding, painting, assembly, and quality check. CKD production has more processes when compared with simply assembling vehicles. This means that it will contribute to the development of people that have skills and techniques for doing this type of business, which did not exist here before.” The new factory is expected to produce 3,000 cars a year, due to the complex process of full-cycle car assembly. The factory’s assembly line can produce eight car bodies per hour. Prices for the domestically produced vehicles will range from $39,200 to $44,500, heralding Kazakhstan’s arrival as a contender in the global auto manufacturing industry.