BMI View: BMI's outlook on auto production and sales in Kazakhstan and Uzbekistan remains positive, despite a slowdown in sales figures in the first eight months of 2014. Both countries boast solid macroeconomic fundamentals and both are seeing strong demand for cars from their citizens.
Turning to production first, Kazakh auto production looks set for strong growth over BMI's five-year forecast period to 2017. This reflects new production plans by carmakers Toyota Motor and Russia's AvtoVAZ and Kazakh AutoBIPEK.
Kazakh auto production looks set for strong growth over BMI's forecast period to 2018. We estimate production to have grown in 2014 by 9.5%, increasing to 15.2% in 2015. B MI believes Kazakhstan should be well positioned to continue attracting investment from auto manufacturers. Domestic sales are robust, and the country is a viable location for export production. We therefore maintain a bullish outlook on production growth over the long term.
In June 2014, Toyota Motor Corporation started the production of the complete knock-down (CKD) of the Fortuner sports utility vehicle (SUV) at Saryarka AvtoProm (SAP)'s Kostanay plant in Kazakhstan. The move marks the beginning of production by the automaker in Central Asia. Nearly 3,000 vehicles will be manufactured annually at the plant, where SAP has recruited 100 more employees.
On the 1 October, the CEOs of 'AvtoVAZ' and 'Auto BIPEK' signed an agreement on strategic cooperation in the presence of Russian President Vladimir Putin and Kazakh President Nursultan Nazarbayev. AvtoVAZ will construct a factory in Kazakhstan with Azia Avto. The Lada Vesta will be produced at the site from 2016. The companies intend to produce around 120,000 units a year at the new factory.
For Uzbekistan, BMI is generally upbeat on the outlook for auto production over the forecast period. For 2014, we are targeting a 7.6% year-on-year (y-o-y) increase in production with total units rising to 301,096. In 2015, we predict production will grow by 6.8% to 321,566 units.
The Kazakhstan new car sales market saw continued growth during 2013, with sales up by 56.4% to 153,664 units, according to BMI's calculations. Despite not matching 2012's stellar figures, Kazakhstan's growth in sales remained one of the strongest worldwide. Further strong performance is expected over BMI's five-year forecast period to 2019.
BMI's outlook for the medium-term outlook for the Kazakh new car sales market remains optimistic, but growth will slow down to an average of 17.4% between 2014-2018, to reach in excess of 300,000 new vehicles sold in Kazakhstan in 2018.
For Uzbekistan, we envisage steady growth in auto sales, slowing down towards 2015. We predict annual growth of 6% in 2014, to 114,418 units. In 2015 sales will increase to 120,368 units, a y-o-y increase of 5.2%. Sales growth has slowed down from 7.2% in 2013 due to low base effects and weakening demand from main export partner Russia for GM Uzbekistan produced vehicles.
We do not remain as optimistic on the Kazakh market's prospects compared to last year. Real GDP's solid performance of 5.9% in 2013 is forecasted to slow down significantly in 2014 at 4.3%; however, growth will pick up in 2015, reaching 5%. Economic activity has been constrained by falling global oil prices, production issues at a number of key oil fields and subdued household consumption in the wake of the February 2014 devaluation of the tenge. Private consumption is to set to stay relatively stable in 2014 as will demand for new purchases as Kazakhs increasingly continue to take consumer loans to finance auto purchases despite the Kazakh authorities' desire to see lending growth slow dramatically.
BMI expects GM Uzbekistan to retain its virtual monopoly on new car sales in that country, despite a steep decrease in exports to Russia in Q114, where total units decreased by 19% y-o-y. Opportunities for other automakers in this country will remain highly limited as we enter 2014. High import tariffs and other taxes also act as a deterrent for non-GM purchases within the country.
Kazakhstan offers more opportunities, with French carmaker Peugeot launching its first dealerships in the country in October 2013. For now, however, Russian car brand Lada remains the dominant automaker selling on the Kazakh market. Over 8M14, Lada had sold 30,386 units, for a market share of 28.33%; however, this is down -12.57% on 8M13. KIA leapt up the rankings to gain second position with 11,947 units sold, a market share of 11.14%. In third place is Hyundai with 9,266 units sold and a market share of 8.64%. Chevrolet also performed well in 8M14 selling 8,104 cars, in fourth place with a market share of 7.56%. Daewoo saw sales slip to 6,073 units, a market share decrease of 3.01% and now occupies sixth place.