New Kazakh-Russian auto plant driven by booming car sales in region

By bne IntelliNews November 11, 2013

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Construction of a giant new auto plant in Kazakhstan kicked off on November 10, as Russia joins its Customs Union peer in a joint venture targeting booming car sales across Eurasia.

The new manufacturing facility in the eastern Kazakh town of Ust-Kamenogorsk is being built by Russian-Kazakh joint venture Azia Avto Kazakhstan. Scheduled for completion in 2017, the plant is one of the largest JV projects between the two countries launched in recent years.

Around 12,000 will be employed at the construction stage, according to Kazinform, with investment reaching $400m. The plant will supply cars to Kazakhstan, Siberia and the Russian far east, Central Asia and the Caucasus.

Russia's largest carmaker Avtovaz - which builds the Lada brand in southern Russia - signed an agreement to set up the JV with Kazakhstan's Azia Avto and and SEC Ertis last year. Under the agreement Azia Avto took 50% plus one share, Avtovaz 25% plus one share, and SEC Ertis - which was set up to support development of the eastern regions of Kazakhstan - 25 % minus two shares, according to a statement from Avtovaz.

The project was agreed at the Pavlodar interregional cooperation forum in September 2012, and later given approval by the presidents of Kazakhstan and Russia. Several deals between the two countries on cooperation in automobile parts production were also signed during the groundbreaking ceremony on November 10.

The Kazakh car market is particularly ripe. It has boomed recently, with a steady rise in purchases of both imported and domestically produced cars in 2012 and 2013. Research from Qncepto shows that 46,900 vehicles were sold through official dealers in the third quarter of 2013, an 83.97% year-on-year increase.

It's a trend that has persisted through the year thus far; sales of domestically assembled cars in the first seven months of 2013 saw an 85% year-on-year increase, according to the Association of Kazakh Auto Business (AKAB). Vehicles built in Kazakhstan make up just 21% of total car sales however. Last year, Kazakh sales of new cars peaked at $2bn, beating the total seen during the pre-crisis consumer boom.

In addition to the new factory in Ust-Kamanogorsk, other manufacturers have also set up in Kazakhstan or are expanded existing operations. In June, PSA Peugeot Citroen announced plans to launch production in the northern industrial city of Kostanai as part of its strategy to diversify away from its base in Europe.

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