Russian AvtoVaz to assemble cars in Kazakhstan instead of exporting them

By bne IntelliNews March 14, 2016

Russian carmaker AvtoVaz plans to assemble cars in Kazakhstan instead of exporting ready-made cars, the company’s spokesman Sergei Ilyinsky said on March 10. He said that AvtoVaz will supply knock-down kits to its Kazakh partner, Bipek, but provided no further details about schedule or volumes of such arrangement.

The announcement confirms media reports about uncompetitive Russian car exports to Kazakhstan since the beginning of 2016. Russian daily Vedomosti wrote on March 10 citing companies’ sources that AvtoVaz, Kamaz and Honda carmakers completely halted deliveries, while Ford Sollers, Nissan and Renaut struggled with their exports of cars to Kazakhstan. The reason is the introduction of higher recycling and registration fees in Kazakhstan on January 1, which led to an increase in the price of a Russian car by RUB150,000 (€1,920) on average. The recycling duty was set at a basic rate of KZT106,050 (nearly €300) with coefficients ranging from 3 to 23 depending on a vehicle for EEU producers to support local production and curb “grey” imports as the weakening of the Russian currency has encouraged Kazakhs to buy cars directly in Russia.

The move by AvtoVaz was warmly welcomed by Andrey Lavrentyev, the head of the Association of Kazakh Auto Business (AKAB). “Indeed, it is great and already expected news. Now we will be able to develop the construction base, expand production capacity and increase staff,” he told Forbes Kazakhstan. Lavrentyev said that car production capacity in Kazakhstan might even double from the current level of 40,000 per year.

Meanwhile, Erik Sagymbayev the president of the Bipek’s car manufacturing company in Oskemen (also spelt as Ust-Kamenogorsk), has promised a sufficient supply of AvtoVaz’s Lada models on the Kazakh market. “The assembly of new models on the premises of the local plant will be launched within the current year, so no long-term shortage of Lada cars is expected on the domestic market," he said on March 10. Bipek started the production of Lada 4x4 Urban SUV model in the company’s plant in Oskemen in late 2015. The company aims to expand production line to Lada models such as Vesta, Kalina, Granta, Priora, 4x4 5d, XRay and Largus.

AvtoVaz is Russia’s largest carmaker. The company is controlled by Alliance Rostec Auto BV which holds 74.5% of shares, while minority shareholders have remaining 25.5%. Alliance Rostec Auto is a joint venture of Alliance Renault-Nissan (67.13%) and Rostekhnologia (32.87%).

Bipek Avto - Avto Asia is the largest holding company in Kazakhstan's automotive sector. It specialises in exclusive sales, deliveries and servicing of KIA, Skoda, Chevrolet, Lada, UAZ and Renault cars. Also it is involved in car assembly in a joint venture with AvtoVaz. According to the Kazakhstan Stock Exchange (KASE), Bipek Avto-Asia Avto is controlled by Anatoly Balushkin,44, with 74.21% of share, who in 2015 was ranked 31 with $230mn on Forbes Kazakhstan’s list of the richest businessmen in Kazakhstan.

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