“Our government defended its right to a unified localization within the CU”

– Results of the year: in 2013, 165 thousand new, officially presented vehicles were sold, including commercial vehicles. 38 thousand Kazakhstani cars were sold, which is 21,5%. This year we expected a volume of 214 thousand cars, that is, an increase of 23%, but now this is hardly possible given the devaluation. Therefore, at the end of April, AKAB lowered its market volume forecast for this year to 150-160 thousand. Why did it lower it? Because it is already clear that, starting in March, many companies have bargained with discounts at old prices. These discounts teach people that they can buy a car at a discount. This process will continue until the beginning of summer, then perhaps we will begin to improve. Therefore, taking into account these lost months, the most ideal scenario is 150-160 thousand in 2014.

– We don’t count used ones, only new ones, because last year second-hand made up less than 2%. And this year there will be the same volume. It should be noted that some models dropped out of the market this year.

– Uz-Daewoo with the Nexia model, Matiz, Zaz with the Chance model, Zaz with the Forza model, as well as part of the UAZ production line that does not have the Izofix system. Also, everyone is preparing for the technical regulations of 2015, everyone is preparing for Euro-5, so the market layout for some models will still change. As for the Kazakh trend, we hope to increase the volume of sales made in Kazakhstan, and get 23-24%, and “gnaw off” a little from importers, because imports have still become more expensive in relation to Kazakh cars.

– The decrease occurred taking into account the forecast, absolutely correctly. Why? Because cars are not an essential commodity, and people still try to postpone this purchase, say, until September, and perhaps postpone it until next year.

– We received instructions from the government under the new SPFIID-2 program, under new financing: the government will invest money in the domestic automotive industry. This will include investment grants, investment money, and perhaps even working capital for some businesses. Therefore, I think that the volume of Kazakhstani production will increase and gain new positions in the market.

As for subsidizing interest rates on loans and recycling, these are the two systemic solutions that have a real effect. These are the two main methods throughout the world that give real results. And through the use of these methods, it is possible to increase and stimulate demand. As we saw in Russia, even one measure to subsidize the rate last year gave a 12-14% increase in sales of domestic products. I would especially like to point out that it is not support, but growth. Therefore, of course, these two systemic measures are quite important; we are working and discussing them together with the government and the NPP.

– The first is recycling. In Kazakhstan now there is no infrastructure, there is no such recycling industry. If in Russia it has already been created, then, unfortunately, we do not have it yet. According to calculations by PREKO Consulting, the creation of this industry will require about 78 billion tenge of investment.

– This is the creation of small factories and large regional shredder enterprises in those areas where the concentration of worn-out vehicles is high. This is a matter of a long process, not just one year. Creation of the industry, according to our experts and consultants, will take about five years. You need to start recycling cars, build a recycling program, clear rules and criteria in parallel. Accepting cars and giving some kind of subsidies when in reality we cannot dispose of these cars is simply impossible.

- Right. Currently, there is a developed concept, which we presented to the Ministry of Environment and Water Resources, MINT and NPP. This is a real recycling concept in the Republic of Kazakhstan. We know that out of 3,5 million cars, 2 million in a year will be beyond the 20-year service life line. This means that today about 600 thousand cars need recycling, half of which are just a registration certificate. No car. It sits in the yard, rots, and doesn’t drive.

– This program has been conceptually adopted by the Ministry of Environment and Water Resources, because recycling is a critical issue, including the environmental responsibility of a car manufacturer. In any case, we must understand: the older brother is auto production, the younger brother is car recycling. They, like twins, cannot live without each other, and if we follow the path of civilized development of the automotive industry, then we definitely need the recycling of worn-out cars.

– This is the total cost of the entire structure and the entire recycling industry in Kazakhstan. Its creation is expected to take up to five years. This creates the entire structure, with logistics, local processors, transportation of the already separated product to the shredder plant, and then sending the raw materials for recycling, that is, the entire chain, the complete structure of the recycling industry. The figures for the volume of investments have actually been confirmed; this is quite a serious conceptual work, analysis and research. We have taken all the international experience in applying the concept of the recycling industry.

– We have several scenarios. Which one will be chosen depends on the investment indicators that we are currently working on.

– You are right, there are three global transport safety problems. The first is old cars that drive, and I'm not even talking about emissions, black soot and other environmental problems. This is a thorny issue in an old, worn-out park. Almaty residents, like no one else, feel the consequences of harmful emissions when the city is practically invisible due to smog. Harmful emissions account for 80% of the city's pollution. The akims of Astana and Almaty have already begun large-scale programs to convert public transport to more environmentally friendly fuels. Last year, bus fleets and Eco-Taxi projects running on gas fuel were already launched. Second: technical inspection, which in European countries and our close neighbors is a real tool for determining a car’s roadworthiness. There is another approach: if within a year a car fails to pass technical inspection three times in a row and does not meet established safety and operating requirements, it must be scrapped. Because, apparently, either its owner does not want to deal with the car, and, naturally, does not have the right to operate it, or he simply cannot repair his car anymore. A technical inspection is a tool that allows you to determine the suitability of a car, its compliance with environmental requirements and safety. Moreover, when we raise the issue of technical inspection, we affect not only car owners, but all citizens of the Republic of Kazakhstan. Firstly, the environment concerns everyone. Secondly, we are all, one way or another, road users. We cross the street, ride buses, we don’t live in a closed world. And in order to get to the airport or train station, we use transport – our own, someone else’s or public – it doesn’t matter. Even when moving on foot or by bicycle, we find ourselves on the roads, on the sidewalk, where a car without brakes can fly out. And when someone is indignant that this is inconvenient for car enthusiasts, this is a paradox. Because it is not car enthusiasts who make decisions about technical inspection, but you and I – those who, perhaps, do not drive cars. Grandmothers and children. He does not personally sit behind the wheel and is not the owner of the vehicle. It is the will of everyone to buy a car, but then everyone must be responsible for the operation and technical condition. Therefore, here we are trying to change people’s consciousness and encourage citizens who do not use cars to think about the fact that technical inspection primarily concerns them, and we cannot exclude them from solving this problem under any circumstances. And problem number three is taxis. This is a global problem. At the airports there are “bombs” whose blood alcohol levels are not checked before leaving, the condition of the car, whether he has undergone training, or whether he has passed a psychological test. This is a huge block that we have never dealt with either. But this is the transportation of people, security, and partly the crime situation in places where they gather. Here are three blocks of questions where systemic, radical measures need to be taken. There are three projects that we as an association are currently focusing on. Firstly, the auto industry, its support, development and clear rules of the game in the automotive industry.

– According to a certain list, which mainly, of course, included manufacturers limited in cost.

– We must use the scrappage program to encourage the purchase of new and safe cars. An incentive method for recycling old cars is normal. What are we starting from? If we look at European and Russian statistics, we will see that the average cost on the market of cars that need recycling ranges from $1200 to $2000. For us, these are, say, “Zhiguli”, old Japanese right-hand drive cars, 20-year-old “ Europeans." With an upper and lower limit, we can equalize this to $1500. When a person comes and is happy to hand over his worn-out car, receive a certificate, and then use this certificate to buy a new car. This is exactly the systemic mechanism that allows us to stimulate the recycling program and take a comprehensive approach to the issue of updating the country’s vehicle fleet.

– There is an understanding, there are even specific numbers, there are tasks that need to be solved today, tomorrow and the day after tomorrow. However, we must remember that we cannot ignore the systemic measures that our CU partners use, in particular subsidizing consumer loan rates. Because every dollar they invest in the development of their automotive industry obliges us to take similar measures in order to remain competitive. We must clearly understand that today this is one market – the market of the Customs Union.

– There are actually issues here that we are trying to resolve. There are certain risks for investors. But we are trying to compensate for them through legislation on the protection of trade rights and brands.

– It limits the development of the multiplier effect from the entire industry: and in particular, the economic benefits for the distributor from the creation of central logistics hubs for the storage and sale of original spare parts.

– There was no blocking of our rights to sell Kazakhstani cars on Russian territory. All these processes are regulated by the manufacturing plants and the brand holder SsangYong Motor Corporation. By agreement between the Russian and Kazakh sides, we are building our trade relations through the SsangYong Motor Corporation. So that there are no distortions in the unified price policy and unified quality policy in the markets of Russia and Kazakhstan. We hope to agree on all pricing related issues with our partner SsangYong Motor Corporation by mid-July. In the meantime, in parallel, we are working to increase production volumes and expand the market niche in Kazakhstan. We also held negotiations with Ukrainian, Belarusian and Azerbaijani companies regarding the supply of Kazakhstan-made cars this year. We have some competition with our Russian colleagues, but this is a normal, evolutionary process.

– Kazakhstan’s policy is aimed at integration processes. Both in the Eurasian Union and in the WTO. Kazakhstan has so far refrained from introducing a recycling fee, but at the same time, such a barrier to the Russian market as a recycling fee, including for Kazakh cars, remains.

- For now, yes. We are still in the process of discussing some issues. Our constructive dialogue does not stop. I am confident that we will reach a general consensus soon.

– I believe that this is absolutely correct, because the Republic of Belarus has already solved this problem for itself. We, figuratively speaking, will now follow our partners as number two with certain solutions that are already working. Our colleagues in the Customs Union are now clearly, correctly and systematically protecting their market. We will also act. So we have a distinction: if this model is made here, it is not made there. This is a normal approach. In Russia Camry is here Fortuner. There are a number of SsangYong models in Russia - here is the SsangYong Nomad with localization. Iveco limited itself to a line of large trucks in Miass (in the Chelyabinsk region) - SaryArkaAvtoprom operates here, and so on. We are not afraid of competition. According to the general rules, we are ready to compete, but there must be common rules of the game, clearly agreed upon.

– We all understand each other perfectly. The only thing that the automotive industry in Kazakhstan could do and give it such an effect was the Customs Union. Without a vehicle, automobile production is an unrealistic, utopian process. Therefore, only integration and a common market in the Customs Union gave us and our partners the economic opportunity to set up factories here. They believe in us more than we sometimes believe in ourselves. And we need to stop being afraid that big Russia will come and crush everyone. You need to decide, talk, prove, look and move systematically. I think we will work it out.

- You're right. World practice shows that if the difference between imports and preferences for car production in the country is less than 35%, setting up a plant is a pointless exercise. Today we have this 35%. Today we are holding a certain punch; we have a minimum reserve, which allows us to be profitable. This allows us to properly develop the automotive industry and invest in new production.

– Localization is a difficult but necessary stage for all manufacturers. It’s one thing to assemble a car, the second thing is to move on to actual production. Start welding and painting processes. Learn how to produce automotive components. Localization with small production volumes is almost impossible. Accordingly, we have two questions. First: this is the volume of products, when localization becomes profitable, or process No. 2, which plays to our advantage, these are logistics costs.

– Some automotive components in Kazakhstan and Russia will be more expensive than, for example, at the SsangYong plant in South Korea. This should be clear to everyone. But we can win in logistics. A simple example: a battery in Korea costs $17 because it is produced in very large volumes. It costs $30 here. But when this battery arrived here from Korea, its cost increased to $45. Therefore, it is more profitable to buy it here, at the Kainar plant. We will take our first steps in localization for those automotive components that are large and expensive in logistics. The first stage is plastic, headlights, glass, batteries, tires, wheels, plastic parts, fender liners, exhaust system, gas tank and seats. We understand perfectly well that any localization is a foundation for the future. The larger the production volume, the more justified localization is.

- Yes. Our government defended its right to a unified localization within the CU. This means that any automotive component produced in Russia and Belarus counts towards localization in Kazakhstan. This is a huge victory for MINT. Localization has a multiplier effect and stimulates the emergence of many companies, including small ones. We are not talking about the final product, we are talking about those small companies within which this spare part can be produced. We can obtain European certification for this component, agree with the manufacturer and install it. This is really a small, medium-sized business under the umbrella of global suppliers.

– We are now focused on producing more models with the welding and painting process. We have a development of auto components, a specific localization program has been protected at MINT, where we have worked on 25-30 companies that will participate in the process. Kaznex Invest is really actively working to attract auto component manufacturers. I am confident that this process will yield results. This is a very important task that we all have to accomplish together.

– There will be a release this summer, parameters – 950 units in 2014, Fortuner model, the cost will be determined later by the distributor. Toyota is targeting only the Kazakh market for now, because we need to learn and analyze everything again. I can say that Toyota is really an anchor project. Thanks to him, we trained the staff, supervised, among other things, the production of the Nomad model, and synchronized painting robots together with Nomad and Toyota. We have attracted specialists, and now we have engineers who will monitor the quality of manufactured products, including Nomad, throughout the year. We worked out the logistics system and principles of logistics at the SGP, and internally adjusted the issue of a parallel production line for final assembly. This is generally just know-how, the best of the best.

– We are talking with Peugeot about the transition to the welding and painting process. Bilateral meetings with the government of the Republic of Kazakhstan are scheduled for July. We are actively expanding our cooperation with Iveco. There is a project with welding and painting processes. The project was approved by MINT. The model planned for production is Power Deli, as well as city low-floor buses and a large-capacity truck. A large workshop has been allocated - 42 thousand square meters. Its reconstruction will begin soon. Another project on which we have high hopes is Hyundai jointly with Astana Motors. A large project on dual education is being developed. As part of it, we chose one institute and two colleges. We'll get to the real results soon.

– I don’t see any problems. Once again, I repeat that all markets are clearly regulated and covered by contracts and licenses. Therefore, after satisfying the needs of the Kazakh market, we will move on to supplies to the Customs Union. The work is underway, the demand within the CU has been studied and understood.

– Yes, some of them, in principle, are not yet in Kazakhstan. After the upcoming bilateral negotiations, specifics will appear.

– We have not yet had contacts with these brands on issues related to production.

Source: http://www.kursiv.kz/