GM looks further afield in CEE with deal in Uzbekistan

By bne IntelliNews April 16, 2008

Clare Nuttall in Almaty -

Central and Eastern Europe has been a hotspot for the car industry for some years now, with Slovakia now the world's number-one automaker in terms of output per capita. But now Uzbekistan, long a backwater in the middle of nowhere, has put itself on the global automotive map after the government signed off on a deal with General Motors to set up a joint venture to make Chevrolet cars.

The US car giant has gone into business with UzAvtoSanoat, the holding company that runs the republic's UzDaewoo Auto factory, which used to belong to the South Korean company until it went bust in 2005 and the Uzbek plant was bought out by the local government.

GM will hold a 25% stake in the GM Uzbekistan joint venture, which was agreed in October, and has the option to increase its stake to up to 40% in future. Several manufacturing agreements were signed between GM and UzAvtoSanoat on February 28. The plant, which is located at Asaka in the Andijan region of Uzbekistan, will produce 250,000 Chevrolets a year, for sale in Uzbekistan and other CIS countries. UzAvtoSanat has the right to build four Chevrolet models - the Lacetti, Captiva, Epica and Tacuma.

"The benefit for us is the potential to build 250,000 cars to sell in Uzbekistan and neighbouring countries. Last year, our partners sold around 70,000 cars in Uzbekistan alone, which gives you an idea of how much demand there is in this area," says GM's CEE spokesman Marc Kempe.

The deal with UzAvtoSanoat is part of GM's push into the CEE market. Chevrolet sales across the region have more than doubled from 140,000 units in 2005 to 288,000 units in 2007. The Detroit-based car manufacturer considers that there is significant potential for expansion within Uzbekistan, given the country's 27m-strong population and economic growth of over 7% over the last five years. The existing Asaka plant, which employs 4,700 people, was also attractive for GM. "There will be no immediate need for investment in production technology, as it's a very technically advanced plant," says Kempe.

Under the joint venture agreement, GM will provide technology and engineering support as it introduces new GM models, as well as training for the plant's workforce. The transfer of GM's know-how is seen as extremely important for the development of Uzbekistan's automotive industry. In recognition of this, President Islam Karimov personally attended the signing of the agreements with GM. Cars are a bit of a hobby for Karimov, who also personally brokered the original deal with the chain-smoking founder of Daewoo, Kim Woo Choong, in the early 1990s.

The Asaka plant has a total capacity of 250,000 vehicles a year. In 2006, it produced 140,080 vehicles - well above the 115,000 target, and provisional production figures for 2007 are around 200,000. It currently produces four Daewoo models - the Nexia, Matiz, Damas and Lacetti. Production of Daewoo models will be gradually phased out over the next four years, and the plant wholly converted to GM production.

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