Central Asia Autos Report 2009

New passenger car sales in Kazakhstan fell to 23,573 units in 2008, from 34,000 units in 2007, according to local press source Kazinform in February. This 31% plunge followed a warning by the country’s Toyota Motor dealership in November 2008, which had flagged the possibility of a 25% fall for the sales market as a whole (i.e. inclusive of all brands) during the year. At the time, Toyota was forecasting that sales of new cars for all brands could drop by a further 17-19% in 2009. The intensification of the global economic downturn makes this forecast appear, if anything, a little optimistic. Many countries have been experiencing plunges in car sales in the order of 40% y-o-y in 2M09. We predict that Kazakhstan will register a further decline of 20% this year.

Production appears set to fall by a similar magnitude. If an economic recovery takes hold in 2010, we predict that sales and production should both begin to bounce back – probably quite forcefully in percentage year-on-year (y-o-y) terms, given the considerable declines registered in 2008 and forecast for 2009.

As with Kazakhstan, Uzbekistan’s autos sector is suffering the fallout from the global economic downturn. A Eurasianet report in March said that General Motors (GM) joint venture (JV), UzDaewoo, had exported just 935 vehicles to Russian dealerships in January, a 85% drop on the level recorded in the period last year. This followed 15,000 unsold/surplus cars being returned to the company’s plant in Asaka in Q308 – roughly 9% of the entire volume of cars produced in the country in 2007. Adding to its woes, weak demand seen in the key export market of Russia at the beginning of 2009 is likely to be sustained throughout the year. BMI’s macroeconomic team is forecasting a recession in Russia in 2009, with negative real GDP growth of -4%. We are therefore predicting a very sharp reduction in car production in Uzbekistan this year, especially given the existing surplus of vehicles, in the order of -35% y-o-y to less than 127,000 units.

Meanwhile, we predict that car sales in Uzbekistan will fall by 20% y-o-y this year. Thereafter, production and sales volumes should begin to grow again (from a low base) from 2010, assuming an economic recovery in Central Asia, Russia and beyond takes place during the course of that year.

In this latest Central Asia Automotives Report, BMI extends its analysis of UzDaewoo and Bipek Avto/AziaAvto, looking at how well prepared they are to deal with slumping sales. We evaluate strengths and weaknesses, including the roles played by state support and the respective backing of GM and AvtoVaz.