President of the Association of Kazakhstan Automotive Business Andrey Lavrentyev told abctv.kz about the results of 10 months in the car market and his forecasts for the next year. The car market has found its bottom According to the results of ten months of this year, published by AKAB, official dealers sold 36 new cars. The market leader, according to AKAB, is Toyota, with 599 cars of the Japanese brand sold. Lada is in second place - 6 cars were sold, and Renault closes the top three - 743 cars found their buyers. Compared to the same period last year, sales increased by 6%.
— How do the results of ten months of this year compare with the indicators of the past, and what are your forecasts?
— We need to divide the market into two parts: cars assembled within the country, and imported cars. Total sales for ten months amounted to thirty-six thousand cars. If we compare it with last year, then yes, there is a decline. But this fall was predictable and absolutely obvious. Because, taking into account the devaluation of the Russian ruble, three hundred and eighteen thousand cars were imported over a period of 5-6 months, which is twice the volume of the Kazakh market. Deferred consumer demand ended in the middle of this year, and before that the market continued to fall. Only in August last year we returned to parity between the ruble and tenge. Naturally, no one bought cars here - it was unprofitable for buyers. Those who needed cars, and those who did not need them, all bought cars in Russia, even in reserve. Now these people don’t come - they bought cars for future use. Therefore, when we say that the market decline persisted, there is no need to worry. It was predictable. We consider what share in the sales structure of the Kazakh car market is occupied by domestic production. We see an increase: production volume this year compared to last year is 15%. By the end of the year we want to give 30-40% compared to last year. In this regard, the market share of Kazakh companies in the structure of the overall market is sharply increasing. If last year it was 18-20%, then this year it will be 30% in June, and by the end of the year it will be 30-40%. That is, if earlier we said “Every fifth car is produced in Kazakhstan,” then soon every second car will be produced in Kazakhstan. For a sustainable model, we need to have a 50% market share, then we can meet the requirements for localization of production. The overall market has stabilized; we have not seen a decline since the middle of the year. We believe the market bottom has passed. The volume of Kazakhstani production in the market structure has almost doubled. Our sales forecast for next year is 55 thousand cars.
Will this growth be due to a reduction in imports, or an increase in production in Kazakhstan?
- It will be a mutual movement. Firstly, the market has changed: if previously a larger segment was occupied by cars costing 15-20 thousand dollars, now more than 50% of the market is made up of cars costing less than 10 thousand dollars. I can’t even name an imported car now that costs less than 10 thousand dollars. Maybe some Renault models. And the main models in this price segment are produced in Kazakhstan. We have no chance of not ensuring the localization of 50% of production: Lada and JAC cars are produced in Kazakhstan. The assembly of cars of another brand will begin soon.
— What kind of brand will it be? From what country?
- I will not say. I just can’t do it yet – I’m constrained by non-disclosure obligations. We are currently discussing this in the government. We will inform you soon. That is, the three brands will create a common basis for the growth of the segment of cars under 10 thousand dollars. They will occupy fifty percent market share. Because there is simply no other option - you cannot come and buy an imported car for less than 10 thousand. In addition, there is a segment of Korean and European cars, which are also produced in Kazakhstan. Therefore, I am very confident about next year. –
Will there be more money for preferential lending?
- Will. Now we have 26 billion tenge, of which about a billion tenge have already been returned in revolver form. Next year we expect somewhere between 5-7 billion “revolver” rubles, and so in subsequent years the amount will be returned. In addition, we came up with an initiative in the government to finance 15 billion tenge for 2017 and 15 billion tenge for 2018. I am inclined to believe that they will still support us, because the indicators indicate that the program is having a real effect. Our main measure is production volume. We are increasing production volumes, which means the program is working. If we reduce the volume, it means the program is not working. Obviously, our program is working: for commercial vehicles, for passenger cars, there has been a 15% increase in just ten months, this is in a falling market. The market is falling, and we are increasing production - this is cool! I think that the government will support it, because investors have fulfilled all investment plans and new brands have appeared. There are not many efficient, developed sectors of the economy; moreover, the money they give us is repayable. Banks are responsible for them and provide a guarantee.
— Can this money become cheaper?
— It doesn’t work out because this funding for the National Fund, DBK, must be earned by the bank itself, which bears the risks. The bank takes money and returns it in the same amount, but for this it must have its own margin, which, in fact, is strictly limited by the government to 3%. I don't know of a country in the world, other than America, where a car loan is issued at a rate below 4% in local currency. — Many dealers have now started working using the trade-in system.
Is this a profitable business or are they therefore investing in the future?
— Now everyone works on trade-in. This is due to competition. For example, Toyota is a super brand; this year it occupies almost 20% of the local market. Can you imagine: 20% is a premium brand? People in Kazakhstan love Toyota very much, but not because it is a good car, although it is. They have their own credit program; they sell cars on credit at 4%, although in foreign currency. Plus they have a trade-in to exchange any old car for a new one. They want to maintain their market share, understanding that whatever market share they carve out for themselves now, in a falling market, they will keep. They thus do not work for margins, but invest in the future. This is generally Toyota's strategy. The capitalization of this company is one of the highest in the world. — During the crisis, some brands curtail production in Russia.
Is there a similar threat in Kazakhstan? - I'll tell you straight. The exit of investors from the Russian market is primarily due not to the economic situation, but to the sanctions war. General Motors and several other brands left Russia due to sanctions. From an economic point of view, the manufacturer always has a stock of previous periods, accumulated investments, and profit. Therefore, we must understand that no company can simply leave the market, losing market share and investments in the country. Even during a crisis, there are measures when the level of production, localization decreases, the cost of cars decreases or increases - all this is related to the economy. The Russian option is directly related to the sanctions war, and this does not threaten us in Kazakhstan. Moreover, our list of investors is expanding, because there is an opportunity to enter the market inexpensively when importers are losing their market share, and investments in production are justified. We see a trend - this year several global players have become interested in production in our country.
Author: Arthur Miskaryan, Atameken Business Channel
Source: http://abctv.kz/ru/news/«rynok-padaet-a-my-daem-rost-proizvodstva-–-eto-kruto-»