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The Uzbek government makes it painfully hard for motorists to buy a car. And even though the main domestic producer of vehicles, GM Uzbekistan, is suffering from falling exports to its main markets of Russia and Kazakhstan, perverse regulations and policies are making it even more expensive and difficult to purchase one.

Central Asia's largest car producer GM Uzbekistan, a joint venture in which the US' General Motors holds a 25% stake and the Uzbek state the rest, is expected to produce more than 250,000 cars this year, Uzbek media bragged earlier this year. The Uzbek-US joint venture, located in the town of Asaka in the Fergana Valley, produced 246,641 cars last year, and had increased its output to 52,782 cars in the first quarter of this year, up by 15.7% from the year-earlier period.

Despite the rising output, sales of Uzbek-made cars, namely the best-selling Nexia and Matiz models, have been falling in the major export markets of Russia and Kazakhstan. First-quarter sales of Uzbek cars in Russia fell by 14% on year to 17,369, continuing a trend that started a couple of years ago when car exports to Russia fell from a peak of 92,778 in 2011 to 60,829 last year. Sales in Kazakhstan had grown from 3,829 cars in 2011 to 13,371 cars in 2013, but similarly fell in the first quarter by 53.7% on year to 1,691 cars.

The reason behind the fall in sales is Russia's introduction of a recycling duty on imported cars following its accession to the World Trade Organization (WTO) in 2012. This levy has driven up the price of Uzbek cars on the Russian market, making them less competitive. At the same time, the recent fall in Uzbek car exports to Kazakhstan is blamed on new Customs Union regulations that require imported cars to be equipped with at least one airbag, an anti-lock braking system, specific attachment points for child-safety seats and daytime headlights, among other things.

These decreases have largely hit the sales of GM Uzbekistan's most popular Nexia and Matiz models. Perhaps in response to the shrinking export markets and in order to maintain high prices on the domestic market, GM Uzbekistan cut output of these cars by 3% and 4% in 2012, respectively, and by 29% and 43% in 2013. The joint venture cut the number of Nexia and Matiz cars further by, respectively, 10% to 11,613 and 59% to 2,830 in the first quarter of this year.

Tricks of the trade

A paradox of the Uzbek car market is that the price of a locally produced car in Uzbekistan is actually higher than in foreign markets, and the price of a used car is higher than that of a new car. The Uzbek authorities have imposed high import duties and levies (at 30% of a new car's customs value plus $1.8 to $3 per cubic centimetre of an engine exceeding 1,000 cc) which, Uzbek motorists say, makes imported cars prohibitively expensive. They complain that because of this, customers are forced to buy local cars "at any price". By keeping prices high on the local market, the Uzbek government subsidises exports to maintain access to foreign markets to earn hard currency. For example, according to GM Uzbekistan's website, dealers can buy the cheapest Nexia for UZS31.307m ($13,652 at the official exchange rate or around $10,500 at the black exchange rate) or $9,546 for cash dollars. The prices of Nexia in Kazakhstan and Russia are $8,200 and $8,450, respectively.

The trick to buying a car in Uzbekistan is that GM Uzbekistan releases a limited number of cars onto the domestic market two or three times a year. Dealerships open subscription periods, during which potential buyers rush to enter contracts on the purchase of a car and make downpayments worth around 85% of the price of the car in the national currency. (During such campaigns the national currency, the som, briefly strengthens against the dollar on the black market as buyers exchange dollar savings). Those who manage to conclude such contracts (often by bribing dealers) will then have to wait up to a year until they actually receive their cars. "This means GM Uzbekistan builds a car after it receives payment for it," points out one driver who drives a Russian-made Lada.

If during the wait GM Uzbekistan increases the prices of its cars, then potential buyers will have to pick up the difference or get a refund to their credit card (which they won't be able to swap for cash). Last July, car prices went up by between 7.4% to 28.1% from the prices set in May 2012, depending on the model. Inflation was officially 6.8% in 2013.

Those who don't want to queue at dealerships (or rather storm, as this video shows) during subscription campaigns opt to buy a car on the second-hand market. Since the government has banned the sale of new Uzbek cars within the first year of purchase, the price of a year-old car ends up being higher than the price of a new car: the lowest asking price of a 2013 Nexia ranges from between $12,500 and $13,000 in cash dollars at Tashkent's Sergeli car market.

One motorist told bne that in order not to wait for a year to buy a new car he had used the services of one of the many leasing firms whose prices depend on the size of downpayment, monthly or quarterly instalments and duration of the arrangement. Depending on these factors, a car can ultimately cost as much as $20,000, he explained.

Instead of diverting the cars that are unwanted abroad onto the local market or even increasing production to meet the extra demand, GM Uzbekistan is increasing the production of expensive high-end cars, which aren't popular with most Uzbek drivers. The first-quarter production of Malibu saloons and Captiva SUVs increased by 110% and 310%, respectively, even though these cars have failed to find much of a market in Uzbekistan where the average salary barely exceeds $300. At prices in excess of UZS100m ($33,300 at the black market rate), Malibus and Captivas can be purchased freely at Tashkent dealerships.

"If Uzbekistan had a decent customs policy, no one would drive Uzbek-made cars," reckons the Lada driver from Tashkent.