Andrey Lavrentiev spoke about the situation in the automotive industry and the results of the year.
— Andrey Sergeevich, in short, what are the results of the year?
— Results of the year: 163 thousand sales. We had a sales plan of 190 thousand, but it was, as they say, reduced to minus by two circumstances - the devaluation of the tenge that took place in February, and the devaluation of the Russian ruble at the end of the year.
If we look at the statistics, namely, purchases of the Russian ruble in the last three months of the year, when we had the bare minimum of sales, exchange offices sold Russian currency worth 88,2 billion tenge to citizens of our country, and, naturally, all this money was exported to Russia . The bulk of this money went to purchase cars, and as a result, we found that over the past three months, 62 thousand cars were purchased by individuals in the Russian Federation.
All this, naturally, formed the picture that we see now. As for automobile production, here we have maintained the positive trend. Despite the depreciation, production volume increased.
- For money?
- Yes. Quantitatively, there was a slight reduction. But here we must understand that in the situation with the Ukrainian crisis, we did not produce the ZAZ model, and there was a transition to the middle price segments. If we talk about specific numbers, a little more than 37 thousand Kazakhstan-made cars were produced.
— Is this in general or for the SaryarkaAvtoProm company?
- This is in general. If we talk about our group of companies, the growth was 18% compared to 2013. This is a good positive trend. If we talk about brands, last year we signed a contract with Geely, this is a serious Chinese automaker. This is the first serious and large project that we will develop this year. In particular, install welding and painting lines.
— So we are not talking about large-scale production?
- Absolutely right. This is a small-scale production. In the future, we are going to release 3 models with Geely. Now we are talking about the GC-6 model, this is a low-cost segment model in the price category up to $12 thousand, this is currently the most popular and popular segment.
— What will the other two models be?
“We are now negotiating this matter with our partners, taking into account market prospects, Euro-5 and Euro-6 standards, in order to comply with technical regulations and have the most correct price positioning. I think that by mid-2015 we will complete these studies and agree on what models we will launch into Kazakhstan. I want to emphasize that this is not a local project, it is a project within the framework of the Eurasian Economic Union.
— So you are immediately considering the issue of exporting to at least Russia and Belarus?
- Absolutely right. We now have a free market, and we see no barriers or reasons not to supply Kazakhstan-made cars to the EAEU market. As for the overall development options for the automotive industry, last year we approved a Road Map for the development of the automotive industry. After the Prime Minister visited our enterprise in Kostanay, a round table was held, where all automakers, including manufacturers of buses and commercial vehicles of the Republic of Kazakhstan, participated, and it was decided to make a real, I emphasize, a real document, which reflects all measures of state support, not limited to issues only, for example, localization. And such a document was prepared. However, due to the well-known devaluation of the Russian ruble, unfortunately, many measures from this “Road Map” were forced to be situationally revised.
- Почему?
— Because at the moment they do not correspond to the current situation on the market, which has developed with the fall of the ruble. Therefore, we were forced to ask the government to revise the Road Map, adding additional measures, so-called situational measures. If we talk about specifics, we proceed from the position that a crisis is still a finite phenomenon in time. And the automotive industry cannot be built with a planning range of two to three years. There is a clear strategic plan. Therefore, having taken on strict obligations to localize and increase production, we are, of course, thinking about government support measures. And they divided them into two parts - the so-called tactical support measures: these are measures to ensure the market and a set of situational measures designed for 2015-2016...
— That is, for the period of crisis?
- Absolutely right. And strategic measures are long-term measures to stimulate the market and measures to meet investment obligations, both ours and the government’s. When we combine tactical and strategic measures, the end result emerges. The implementation of the second five-year plan of the state program FIID-2 is especially important during a crisis.
- And what is the result?
— This is the production of automotive components in Kazakhstan, this is a redistribution, or, to make it clearer, our own localization of up to 50%. And, of course, the production of 190 thousand cars. As well as the transition to the production of our own car model on a borrowed platform and to R&D (research and development) and the creation of additional innovations in this area. If we take it historically, why does the government understand the need to support the auto industry? World practice shows that many states prioritize automotive production among the entire industrial sector and the automotive industry of the Republic of Kazakhstan is no exception, because historically it received an impetus for development with the participation and thanks tothe lava of the state, and this, on the one hand, is support, and on the other, a great responsibility. For every dollar invested, the production of a car generates an equivalent income of up to $4. This is a huge multiplier effect. To be honest, I don’t know of any other industry like this, except perhaps the oil industry, which gives the same effect. For every person working in the industry, there are ten people working in other industries, this is a significant indicator. And this is a significant contribution to GDP.
However, to create these ten places, a lot needs to be done - first of all, organize the production of auto components...
Our tactic now is not to wait for large, global manufacturers of auto components, not to wait for the crisis in Russia to end, our plan is different - it is to take countercyclical measures. That is, do not even talk about reducing personnel, this is an option that we are now discussing, but, on the contrary, redistribute this personnel to training programs, perhaps send them for internships abroad in order to begin training our promising engineers and mechanics. Invest money in purchasing equipment and increasing localization. We really hope that the government will support such a strategy. When we are ready to take on obligations, when a business that lives here and does not have double passports is ready to really invest and develop, then we, of course, hope for understanding. And the detailed plan that we are now discussing with the Cabinet of Ministers will allow us to achieve our goals in 2019.
— Regarding localization. There has always been a problem with the relatively small volume of our own production...
- Absolutely right. They point this out to us all the time - I declare that large volumes of output are needed. But the localization program that we are now offering eliminates this issue.
- How?
— This is the production of automotive components for the needs of the plant and the production of components for the most popular cars in the secondary market. And ours is huge. In order to displace gray imports consisting of uncertified goods, often homemade, we will offer an alternative line of original spare parts with the only difference in the country of production. As a result, by dividing these flows, namely the primary flows to the plant, even if these are small volumes, and a sufficiently large volume of production of auto components for the secondary market, we will achieve a quantity that will allow us to truly establish the production of auto components in the country. We have already discussed this scenario with our foreign partners. In my opinion, this model is ideal for Kazakhstan. Otherwise, we will simply waste time negotiating with global manufacturers and then explain to Kazakhstanis why everything is so expensive. We believe that the model we have chosen is truly competitive and feasible.
— Is there any analysis at least by car brands?
- Yes, I have. This is primarily the Mercedes brand, this is the Audi and Volkswagen brand, of which there are a sufficient number on the secondary market. These are, of course, Toyota and Nissan. The most popular models that are on our market. And here there is a huge field of activity for the production of automotive components. I'm talking about headlights, bumpers, fender liners, which are really necessary both for the primary market and, naturally, in much larger volumes for the secondary market.
— You mentioned the figure of 50% for localization. Is it real or is it a dream?
- No, this is not fantasy. We are not changing our strategy. We believe that it is necessary to achieve a 50/50 ratio, when at least 50% will be produced in Kazakhstan.
— In Kazakhstan they talk a lot about the recycling fee in Russia...
- Yes, this is a barrier. We are talking about this, and this must be absolutely clearly understood. But in general. Objectively speaking, we believe that this barrier is situational and by 2016, as a result of measures that both Kazakhstan and Russia can take, this problem will be resolved. Taking into account WTO requirements, this measure was extended to any car, including local manufacturers from Russia and, naturally, to manufacturers from the Customs Union.
— So this measure also applies to Russian manufacturers?
- Certainly. But there is a very important nuance. I would not like to blame anyone, but the state support measures that exist and are regulated by Russia actually devalue this recycling fee for domestic enterprises. That is, in fact, on the one hand, Russia introduces a tax, and on the other hand, it supports its own producers with equivalent measures.
— Why doesn’t Kazakhstan follow this path?
— Kazakhstan is not currently discussing recycling fees.
- Почему?
— Because this issue must be clearly discussed when joining the EAEU, the WTO, and further integration with the EU. Although there was one proposal to introduce the same fee, which would limit the import of Russian cars. In my opinion, this is still wrong. We need to clearly develop our strategy and, as a result, develop a clear, justified position as a countermeasure that will protect the interests of our producers. In the meantime, Russia plans to continue the recycling program and a new launch of a program to subsidize the interest rate when purchasing a Russian-made car.
— Are the same measures being considered in Kazakhstan?
- Are being considered. And in support, and in subsidies, and in leasing operations, both for legal entities and individuals. The full complex is being considered. And we do not exclude from our Road Map a single measure that is in any way aimed at developing the industry. What exactly will remain of these short-term tactical measures, I cannot say now. We are in a daily work cycle. The position of the government is clear to us, now we are looking and considering, including the possibilities of the budget, and, I hope, in the near future a final package of measures will be formed and we will move on to their implementation.
- But the issue of disposal, if you do not have in mind the corresponding fee, is primarily a matter of safety...
- Undoubtedly. We do not deviate from our task. But to introduce a recycling fee as a barrier... Now this issue is not raised and there is no talk about the recycling fee as a protective measure. Now we are talking about the need to create a recycling industry. There's nowhere without her. There needs to be, let's call it that, a junkyard. Because today this cemetery appears randomly in fields, villages, and crops. We are talking about the need for clearly localized and separate production facilities that would deal with recycling. By melting down this metal and transferring it for secondary use. The government understands that this needs to be done. As for the timing of the creation of the industry, we do not yet have clear guidelines. Because we are talking about serious investments. Ultimately, the importer who imports the vehicle must be responsible for its disposal. Now we, as an association, have written to the Committee on Metrology and Certification with a request to check a number of companies that, in our opinion, are issuing certificates illegally. Without following the procedures and, in principle, without having the right to issue certificates for those cars that, according to the new technical regulations, come both from third countries and from the EAEU countries to the territory of Kazakhstan. I would like to clearly emphasize that we plan to develop this practice. And we will bring it to its logical conclusion. Because, on the one hand, the government spends huge amounts of money on the development and support of the automobile industry, and on the other hand, in our country, some kind of “left” gates are organized within the country for the agreed upon legal requirements adopted in the EAEU, according to which certificates are issued. Not to mention the citizens who register their cars without knowing in the future about the problems that will arise due to the certificates issued by these companies.
- What are the requirements?
— The CU defines the responsibilities and requirements for documents such as a safety certificate. On the territory of each country, the manufacturing plant determines its importer and distributor. That is, the one who is responsible for this car and has the right to import it, maintain it and provide the necessary amount of service and spare parts. Anyone else, be it a gray dealer or a private person, must have a certificate. If this is a private person, then this is a certificate of a single vehicle; if this is a gray dealer, then he must have a permit from the manufacturer, which must clearly state that such and such a company has the right to sell cars in Kazakhstan. The lists of all importers are known. We know who has the right to import to Kazakhstan and who does not. Understand that this car must meet all safety standards. At the moment I can say that this is not being implemented. And this issue is under control.
- Who is to blame for this?
“Now I wouldn’t want to look for the extreme and the guilty. But I believe that we should consider this problem as an experience, since we may still encounter similar problems when joining the WTO and within the EAEU. At one time, we also paid insufficient attention to this issue. As a result, people, not knowing what could and could not be transported, began to import outright rubbish into the country. Although, no matter how blasphemous it may sound, there is also a plus in such a situation.
- What is it?
— In crisis mode, the government switches to “manual” project management. When the situation is monitored on a weekly, if not daily basis. As a result, the dialogue becomes much more productive. One more point: the crisis reveals our problems, which we do not want to notice in a growing market. That is, it exposes problems that are already obvious.
And finally, we will use this experience that we are now gaining. I’m talking not only about automakers, but about all manufacturers in Kazakhstan, about work and competition within the framework of any international association.
— So you think that there are positive aspects in the crisis?
- Definitely. This is true in our industry. Because it is very painful. And we intend to strengthen control over such inconsistencies that exist in legal practice.
“But many businessmen complain. That there is a big problem with the protection of intellectual rights in Kazakhstan...
— In fact, there are clear rules of technical regulations. And safety certificates cannot be issued by any national or supranational authorities without a certificate from the importer. And we must fight this by organizing a civilized automobile market, providing conditions for the work of dealers and distributors, who make enormous investments in business for the construction of auto centers, the provision of services and the creation of jobs. It is an established practice for a small seller to enter the market and obtain legal rights. But, having received the rights, the seller assumes certain obligations. Figuratively speaking, if the seller has an uncertified duplicate, then it will not work. But no one prohibits trading in certified spare parts, for which official representatives are also responsible.
— How should the state react to this?
— Most likely, the relevant authorities. including public service centers, should strengthen control. Because right now it is not at the proper level. Cars are registered using certificates - it is unknown how and issued by whom. Only since 2010 we have significantly reduced the stock of junk cars, reduced the number of accidents on the roads, and now we are rapidly returning to the previous state.
— That is, the entire secondary market of Russia has poured into Kazakhstan...
- My opinion is that yes, it is so. I note that, as a rule, the part did not meet the technical requirements of Kazakhstan, but was registered according to the standards of the Russian Federation. At the moment, enormous efforts are being made to resolve the situation, requirements are being developed, and in the end we are registering according to some not entirely clear standards.
— How will the situation in the industry develop if a comprehensive action plan is not adopted? Are reductions in both production and personnel possible?
— The Ministry of National Economy fully understands the situation and the losses that may occur, in particular, due to gray imports. And the multiplicative losses that may occur if we do not take real steps along the Road Map. And not only the ministry, but also the government as a whole understands this. As for support, I am sure that everything that can be done will be done. Although I will not hide the fact that we, as a business, have a negative scenario under our belt, which we will be forced to apply if nothing that we reasonably believe is implemented. An elementary example. The Russian Federation has 15 regulations regarding support for the automotive industry. Key, strategic and tactical. We have only three such norms. They are also serious. It seems like a sin to complain. These are investments, a free warehouse regime, purchasing rules from national manufacturers. But in the conditions of current competition and the transition to large-scale production, this is not enough. Because if we are in the same market as Russia, we must have comparable support measures. Otherwise, someone initially has much more favorable conditions.
— That is, it turns out, figuratively speaking, that a beginner and a master of sports enter the ring. The result is obvious...
- Absolutely accurate comparison. But this means that we have to work harder and gain experience. After all, we are doing this for the development of our country. Now there is a lot of talk about why we need our auto industry. How much can you spend on their support? But we are only talking about it more for now. And it is needed for several reasons. The industry has just been born - this is one thing, it has shown the most successful growth in the industry - and this is two things. And thirdly, Kazakhstan, from a logistics and infrastructure point of view, has a huge chance to create a cluster throughout the Eurasian space. We cannot miss this chance. And the conversations... This is all a situational issue, due to the devaluation of the ruble. I would like to note that this applies to everyone, and not just the automobile industry. Just excuse the perhaps pretentious comparison, but the auto industry is a measure of the economic state of the country. We must clearly understand that we are not just competitive, we are very competitive, and that is why we are causing serious concern among our partners within the EAEU. This is confirmed by numerous rounds of negotiations that, together with the NPP, they held with their Russian colleagues. By the way, we should all think about why Germany, Russia, Italy, and France are lobbying for their auto industry. This happens because almost the largest industry indicator in terms of contribution to GDP is formed here. This is an investment in production, engineering potential...
— By the way, you said that you want to produce your own car by 2020, albeit on a borrowed platform. How realistic is this?
“We have studied the experience of Thailand, Korea, Malaysia and believe that with the potential that we now have, it is necessary to set such a strategic task. We need our own Kazakh car, of our own design, because a reasonable question arises: why did other countries do it, but we can’t? We believe that we have a historic chance to do this.
- What should it be like, in your opinion? SUV?
— Preferences are changing, and now the more promising one is a class B, C passenger car in the mass segment costing up to $12,5-13,5 thousand. That is, this is the car that the population needs.
— It turns out that you want to implement in Kazakhstan the idea of Henry Ford, who said that every worker should have a car...
- Yes. And so it will be. We will definitely do this. And I am ready to sign this statement.
Information taken from the site http://kapital.kz