– Tell me, please, what are the forecasts for the development of the Kazakh automobile industry?
– Definitely positive. This is confirmed by a number of factors that have been forming an optimistic picture for several years now, and every year it becomes more colorful. By accumulating data since 2007, the Association of Kazakhstan Automotive Business can state that the Kazakh auto industry, having overcome the difficulties of 2008, has already demonstrated an increasing trend since 2009. In particular, the dynamics of sales of domestic vehicles in the passenger car segment is very indicative: annual growth trends since 2009 and in comparison with each previous year have doubled, and in 2012 tripled. The situation with SUVs is even better. There is a natural explanation for all this. I will outline a number of key factors that influence the situation in the domestic automobile industry.
Firstly, this is an increase in the purchasing power of the population. This is perhaps a significant fact indicating the post-crisis recovery of the economy of our country. Every year, a car ceases to be a special luxury and turns into a necessary household item.
Secondly, as a consequence, the improvement of the car lending system. Today, domestic financial institutions have fully appreciated this loan product and, thanks to its widespread use, interest rates, as well as the down payment, are becoming lower every year.
Thirdly, new legislative decisions that have a beneficial effect on the automobile market, including within the framework of the Customs Union. New export prospects are opening up for Kazakhstan, which in turn makes it possible to increase both the volume and quality of production. In general, thanks to the Customs Union, we can significantly develop the domestic auto industry.
And, of course, the entry of new automobile brands and models into the market. This direction remains to be diligently developed, but the first steps have already been taken. Speaking about the introduction of small-unit assembly (the second phase of production), there is every chance this year to implement a project that is significant for the Kazakh automobile industry - the assembly of the SsangYong Nomad car - a compact SUV with all-wheel drive, airbags and all the options necessary for a modern user, the exclusive right to produce which belongs to Kazakhstan.
In general, it is worth noting that the development of the domestic automobile industry is a complex, multifaceted process that requires the involvement of all industry participants. That is why the Association of Kazakhstan Automotive Business has rallied most of the market participants to always keep their finger on the pulse, contributing to the development of the automotive industry in the country.
In my opinion, strong growth will continue. Kazakhstan remains the region's fastest growing automotive market due to pent-up demand and the need to update its aging fleet of both personal and commercial vehicles. According to the analytical service of ACAB, the growth of the car market in the next two years could average 30-40% per year.
The domestic automobile industry is among the priority areas of the republic, since the state of the automobile industry can be used to judge the development of the country’s economy as a whole. That is why, on September 30, 2010, the Government approved the Program for the Development of Mechanical Engineering in the Republic of Kazakhstan for 2010-2014, the main goal of which is to maximize the needs of the domestic market and expand exports by increasing production.
- What is the peculiarity of the Kazakh automobile market and the Kazakh automotive industry?
– In my opinion, one follows from the other, and the peculiarity is in the unique path of formation, in the way our country passes this path. There are no identical models of car market formation in the world, although some similar features are still present. The authenticity of our region, the image of a potential consumer, the economic situation in the country, the characteristics of the auto mentality and even the way of life - all this significantly influences the development of our market. These are the key factors that the Kazakh auto industry is focusing on, in particular, three large sites: AgromashHolding, Hyundai Auto Trans and AsiaAvto. And the general task of domestic production as a whole is to create a unique, competitive and affordable vehicle that will be considered as a necessary part of everyday life. The government's support for the industry is also inspiring. At the current stage of its development, this is a vital injection. Significant support for the automotive industry was provided by the timely FIID Program, the main directions of which in the “Mechanical Engineering” part involved the organization of large assembly plants with an increase in the level of localization through the development of the production of parts and components.
The market is young, it is growing, developing and becoming interesting not only to domestic players, but also to partner countries, including within the framework of the Customs Union in terms of the implementation of joint automobile projects.
Based on the results of the analysis carried out by the Association of Kazakhstan Automotive Business, the potential capacity of the Kazakhstan market can be estimated at 200-250 thousand cars per year.
– Let’s touch on the issue of car recycling. Could you explain what it is?
– The final goal of the recycling program is to renew the domestic vehicle fleet. In our country, this issue is related to the environmental situation and road safety. According to ACAB data, on January 1, 2013, almost 3 million 643 thousand passenger cars were registered in Kazakhstan. Of these, about 300 thousand are simply technical passports, that is, cars disassembled for spare parts, potential candidates for scrap. Those. Objectively, the potential is already obvious. The question is that in Kazakhstan there is no infrastructure for processing end-of-life vehicles. Its development and implementation are associated with significant costs, since recycling points must be provided with areas with protective coatings, special equipment, containers, transport and qualified personnel, and a number of other components necessary for the efficient operation of recycling facilities. In addition, when recycling old cars, many harmful and dangerous substances are released: lead, acid, mercury compounds, and so on. Therefore, incorrect disposal technology can cause significant harm to the environment.
The second issue is the creation of an effective and attractive compensation program to motivate car owners to follow the path of recycling their cars. As part of government discussions, it was proposed, among other things, the introduction of a system of recycling bonuses, consisting of a significant discount, and preferential loans for the purchase of a new car. That is, it is important to achieve a condition at which it will be beneficial to use the recycling program. For example, the Russians carried out recycling with good compensation payments and updated their vehicle fleet by 300 thousand units. In Kazakhstan, according to our data, the fleet can be updated by 60-90 thousand. Unfortunately, at present in our country it is more profitable to sell a car with a service life of over 10 years, including due to low taxes on old cars.
– What is the main value of the car recycling program?
– The main value of the program is a partial renewal of the Kazakh vehicle fleet and a reduction in the share of used cars in exports. Further, the creation of a powerful recycling infrastructure, in which serious players can take part, possibly ready to invest in this area, i.e. automakers and manufacturers of spare parts, which in turn will make a certain contribution to the development of the domestic automobile industry. Of course, this should be of interest to the government and akimats of those cities where the air is heavily polluted. In principle, we can talk about a public-private partnership model, which works in many countries.
- Who is the initiator of the car recycling program in Kazakhstan, how much will it cost, and in what time frame will it be implemented?
– The process of developing and adopting the recycling program is handled by the Government, namely the Industry Committee of the Ministry of Industry and New Technologies. Its detailed cost has not yet been calculated. The volumes and areas of recycling are currently being explored. Next, the location of factories for these purposes will be determined. Presumably the concept should be adopted in Kazakhstan in the coming year. Of course, the Association of Kazakhstan Automotive Business will take part in a project that is significant for the domestic auto industry and will provide the necessary assistance in its implementation, in particular, in the possible creation of recycling points on the basis of car assembly enterprises that are members of AKAB.
- The development of the trade-in system (exchanging a used car for a new one with an additional payment) in Kazakhstan is hampered by the current tax legislation. Dealers have to pay value added tax twice. How can you solve the problem with the implementation of the trade-in system?
– Yes, indeed, double VAT currently still exists. It is for this reason that, to a large extent, the trade-in system does not find proper development in the country's car dealerships. The root of the solution to this problem lies in the revision of this rule in tax legislation. ACAB has raised this issue with the Government more than once, but at present the principle of double taxation is still relevant. But we, of course, continue to work in this direction, developing options that are convenient for both the Government and car owners. Moreover, there are successful examples of the widespread use of the trade-in system in Russia, where the taxation problem was solved to the benefit of all market participants, i.e. Tax is charged only on the difference in value between the redemption price and the new sale price.
For the domestic car market, the activation of the trade-in system is another positive impetus for development. New cars are becoming an increasingly attractive object for purchase, and if it is possible to replace a used vehicle with a car off the assembly line, the renewal of the car fleet will significantly accelerate. In addition, the volume of legal transactions for the purchase and sale of vehicles in car dealerships, and therefore the volume of VAT on them, will increase.
- Will the introduction of a trade-in system help simplify the car recycling procedure?
– Considering that the average age of cars in Kazakhstan is 10 years and above, then in the case of an established trade-in system and an existing auto recycling infrastructure, a certain part of vehicles can be successfully disposed of.
- There is an opinion that mandatory technical inspection should be abolished in Kazakhstan. Do you agree with this statement?
– Most opinions boil down to the fact that a car is a source of increased danger, which can be minimized by a transparent and high-quality technical inspection procedure. Therefore, I am deeply convinced that road safety comes first! In this case, we are not talking about who benefits from this; the most important thing is to ensure comfortable traffic on the roads for all participants in the transport process.
The age of the vehicle fleet in Kazakhstan is so high that it is unsafe to cancel technical inspections. If a car has not passed inspection, it poses a potential threat to other road users, including pedestrians. There are more than 3 million car owners in Kazakhstan; the remaining part of the population are pedestrians who cross the road and use public transport. And sacrificing the safety of others for the sake of the convenience of the minority is, to say the least, inappropriate.
Unfortunately, there are many examples of road situations when a car malfunctions.
- There is also a polar opinion that the rules for passing technical inspection need to be tightened. How relevant is this?
– Yes, in my opinion this is a necessary measure. Moreover, the tightening procedure should not be complicated. Innovative solutions and technical modernization are also applicable here. In particular, the introduction of a unified information system “Technical Inspection” last year significantly simplified the process. Car owners are freed from bureaucratic and corruption mechanisms and receive confirmation of the serviceability or malfunction of their vehicle as quickly and efficiently as possible.
We should not forget that Kazakhstan is on the list of countries that acceded to the Vienna Convention on Road Traffic in 1968. An international treaty with more than 100 countries was concluded to improve road safety. In addition, Kazakhstan became one of the three parties to the Agreement on Common Principles and Rules of Technical Regulation, concluded in 2010 within the framework of the Customs Union. All this imposes certain obligations both on the country as a whole and on each road user individually. In any case, undergoing a technical inspection of a vehicle is a global practice that guarantees safety on the roads.
It can be stated with regret that, according to the Transport Control Committee of the Ministry of Transport and Communications of the Republic, in 2012 more than 130 thousand vehicles failed to pass technical inspection the first time. Malfunctions of the brake system were identified, defects in lighting devices, problems with the engine and steering were recorded. Since the beginning of 2013, this figure has been significantly reduced, but is nevertheless present.
- Is there a need to return the right to conduct technical inspections to the state?
– You may already know that since the end of July, the function of passing mandatory technical inspection has been transferred to the competence of local executive bodies. This is justified, among other things, by the fact that today akimats have complete and reliable information about the number of registered vehicles and the infrastructure necessary to carry out technical inspection.
This fact will certainly enhance the quality of the process, since it will cover road users as fully as possible. In addition, representatives of the akimat will issue international technical inspection certificates that comply with the norms of the international Agreement on technical inspection of vehicles. Therefore, in general, state control of this area will create the necessary regulation, without excluding the participation of private companies in the process. With business development and the emergence of a competitive environment, the quality of technical inspection services and, possibly, pricing policy will also improve.