How it all started

The history of the domestic automobile industry dates back to 2003, when the first NIVA car was produced. At that time, production volumes totaled only a few thousand (peak in 2010 — 4 thousand). The product line was presented only by VAZ cars. The bulk of the country's car market was occupied by imports.

A key stage of development with specific obligations of enterprises began with the beginning of signing the first agreements on the industrial assembly of motor vehicles in 2010. But, as experience has shown, the adopted agreements on the development of the industry were ineffective, the share of domestic cars sold was only 26% in 2016. New stimulation methods were required.

In this regard, the Government has taken measures to stimulate the industry, such as VAT preferences, the introduction of a recycling fee, the development of soft loans and leasing programs, and measures to support the export of products. A promotional program has been launched.

A major transnational investor was attracted to the development of the industry in the person of SMS – JAC Motors, a strategic partner of SaryarkaAvtoProm LLP. All this became possible thanks to new approaches to the development of the industry, the introduction of incentive programs.

As for the production of commercial equipment, global players began to be attracted to the country. The first major producer to come to Kazakhstan in 2005 was KamAZ. Then, such brands as Daewoo, Hyundai, IVECO, ANKAI and many others opened their production.

As a result, in a short period of time, an entire industry was created with tens of thousands of jobs taking into account related industries, regularly replenishing the budget through tax deductions. The number of car manufacturers has increased, healthy competition has begun to grow.

Today, Kazakhstan is producing all categories of vehicles. 167 car models are assembled in the country, including 39 passenger models, 22 world brands.

Automotive industry is a driver of Kazakhstan's engineering industry

Today, engineering is one of the fastest growing manufacturing industries.

Over the years of implementation of the State program of industrial and innovative development (since 2010), over 130 new machine-building industries worth about 400 billion tenge have been introduced in the country. Created over 14 thousand jobs.

These enterprises have already mastered the production of a wide range of products (from components and spare parts to the assembly of high-precision equipment) and meet the needs of basic sectors of the economy, such as oil and gas, metallurgy and agriculture.

In the State program of industrial and innovative development of the Republic of Kazakhstan for 2015-2019. the auto industry is among the priority sectors. The State Program indicated that global trends will contribute to the development of the automotive industry of Kazakhstan, which will entail the development of related industries such as metallurgy, rubber products, glass, textile, electrical equipment and devices, R&D, etc.

For two five-year periods, the automotive industry has become one of the drivers of the engineering industry in Kazakhstan. The transition from the large-site assembly to the small-site assembly has taken place. For example, technological operations for welding and painting bodies were introduced.

At the moment, 60% of cars sold in the country are made in Kazakhstan.

The average level of localization of the automotive industry is 33%, the maximum for individual models is more than 50%.

Since 2010, it was possible to increase production volumes by 12.5 times (from 4 thousand units in 2010 to 50.4 thousand units in 2019). The share of the automotive industry in the total engineering industry reached 26% against 4% in 2010. The share of the automotive industry in industry was 1.9%.

In 2019, 50,447 vehicles were produced in the automotive industry for a total amount of 359.5 billion tenge, the IFO amounted to 162.5%. Including 44,077 cars were produced, production growth amounted to 46.8%.

The share of Kazakhstani cars in sales increased to 59% (in 2018 — 49%), 4 of the 5 best-selling automobile brands in the Republic of Kazakhstan are of domestic production.

According to the Association of Kazakhstan Auto Business, in 2019, 16,332 Hyundai cars were produced (+ 75.7%), 14,623 Lada cars (+ 9.8%) and 5,366 Ravon cars (+ 912%). The five also included Kia (3,683) and JAC (2,775).

The largest automaker, SaryarkaAvtoProm, accounts for half of all manufactured vehicles in the Republic of Kazakhstan. This year, the Kostanay plant doubled its production to 25,880 units of cars, trucks and buses for a total amount of 186,609 million tenge.

Kazakh auto industry is in export markets

Given the small volumes of the domestic Kazakhstan market, the long-term planning of domestic machine builders should include increasing export volumes.

State bodies carry out relevant work. So, under the mechanism of stimulating the production of environmentally friendly cars in the Republic of Kazakhstan, export financing of automobile industry enterprises is provided.

Along with marketing promotion, measures are being taken to reimburse part of the cost of transporting finished products within the country and certification of products in export markets. This made it easier for our enterprises to access foreign markets.

In turn, domestic enterprises must increase the number of technological operations carried out at enterprises, use local components and materials, and also enter large-scale production. Moreover, in Kazakhstan it is planned to develop an automotive component base.

As a result of the work done, exports increased 10 times compared to 2018. At the end of 2019, 2,629 cars were exported. Cars are exported mainly to the Russian Federation and Uzbekistan. The bulk of foreign sales in 2019 came from JAC (1,471), Hyundai (716) and Ravon (442). These brands are ordered by brand distributors in neighboring countries.

Automotive industry trends

In recent years, automakers have been searching for strategic partners in order to gain access to new markets, expand their sales network, and obtain new technologies. The main directions of development of the automotive industry in recent years have been a significant reduction in fuel consumption through the use of new fuels, the use of new structural materials, and increased comfort; diversification of the model series both in terms of quality and price, as well as for the intended purpose.

A feature of the automotive industry in recent years has been the increasing diversification of lineups.

Kazakhstan's automotive industry is not far behind the global trend associated with the development of environmentally friendly transport. In 2014, the first batch of electric vehicles was produced, and 15 domestic-made electric buses were already delivered to the routes.

Automotive industry development measures

The Government of the Republic of Kazakhstan has taken measures to stimulate the industry, such as VAT preferences, the development of soft loans and leasing programs, and measures to support the export of products.

In June 2019, the Roadmap for the Development of Mechanical Engineering for 2019-2024 was approved, which covers all sub-sectors of mechanical engineering and contains a set of measures for support measures. These are tax preferences, financial and raw materials support, provision of qualified personnel and much more.

On April 3, 2019, a joint action program was adopted between Kazakhstan and the Russian Federation to develop cooperative ties. It provides for cooperation in the following projects.

As part of the promotional cooperation program, KAMAZ PJSC, AvtoVAZ PJSC and Hyundai Motor Manufacturing Rus LLC have begun work on the implementation of joint projects for the construction of factories for the production of main gearboxes for drive axles of trucks, a foundry and a research and engineering center.

The construction of the new Hyundai Trans Kazakhstan LLP plant for the production of Hyundai cars with a capacity of 30 thousand units per year in the first stage, 45 thousand units per year in the second stage, has begun.

JAC Motors is planning on the site of SaryarkaAvtoProm LLP, in addition to increasing production volumes and expanding the range of cars produced, to organize the production of auto components.

In the framework of cooperation with Chinese partners, it is planned to launch factories for the production of tires and engines, which will give a powerful impetus to the development of the automotive component base in Kazakhstan.

In addition, the Ministers of Healthcare and Infrastructure Development approved the Roadmap for the renovation of ambulance transport in the Republic of Kazakhstan, which will allow renewal of ambulance transport through the leasing financing mechanism.

According to the Roadmap, the terms of leasing financing for healthcare departments of regional akimats and cities of republican significance: leasing term up to 5 years, interest rate not more than 7% for domestic producers, advance payment is not provided, grace period up to 12 months. In 2019, 10 billion tenge was allocated for 800 ambulances and 18 mobile medical complexes in 2019-2020.

Support for car manufacturers

Automakers along with other manufacturing enterprises are provided with tax and customs benefits under special investment contracts.

These measures, along with concessional lending programs, stimulate the development of Kazakhstan's environmentally friendly production of vehicles.

Regarding the production of environmentally friendly vehicles in the Republic of Kazakhstan, since 2018, automakers have completely switched to the fifth environmental class, including the manufacture of commercial vehicles, the production of electric vehicles has been mastered.

In the production of environmentally friendly vehicles (corresponding to the ecological class Euro-4 and above; with electric motors) and the fulfillment of requirements for a phased increase in localization within the framework of agreements on industrial assembly, manufacturers are entitled to claim incentives in the form of cost recovery for production processes.

The average level of localization of the automotive industry is 33%, the maximum for individual models is more than 50%. An increase in the share of local content and production volumes together with stimulating development measures is aimed at reducing the cost of manufactured vehicles.

In addition to general measures to support the manufacturing industry, preferential car loans and preferential leasing programs have been well established, within which 50 billion tenge were allocated for 4 years of operation of DBK-Leasing JSC (42 billion tenge for car loans, 8 billion tenge for leasing).

Since October 2019, through the DBK-Leasing JSC, a program of preferential car loans of the National Bank was launched with the allocation of 100 billion tenge for 5 years (annually 20 billion tenge).

The program is in great demand among the population; today, secondary use of funds is underway.

Updating the country's bus fleet

Over the 12 months of 2019, the volume of bus production increased two and a half times (1,076 units).

As an additional incentive, since 2018, a program for the sale of buses of Kazakhstan production on lease has been operating. 33.5 billion tenge has been allocated from the republican budget of DBK-Leasing JSC; today, the supply of 1,550 bus units has already been financed.

According to DBK-Leasing JSC, as of January 2020, 904 Yutong buses, 330 Ankai buses, 181 Daewoo buses, 75 Golden Dragon buses and 60 DongFeng buses are located as part of a comprehensive plan to upgrade the critically worn bus fleet in the Republic of Kazakhstan in production and some of them have already been delivered.

Prospects for the development of the automotive industry of Kazakhstan

In conclusion, it should be noted that the prospects for the development of the automotive industry are really high. After all, the development of the domestic automotive industry is in the interest and corresponds to the priorities of the state, indicated in the program documents of medium and long-term planning.

This year, Kazakhstan will begin production of over 10 new car models. In the short term, the total volume of automobile industry production is planned to be increased to 100 thousand cars, of which 10-15 thousand will be exported to Russia, Kyrgyzstan, Uzbekistan, Tajikistan, Belarus, Azerbaijan and other countries.

In the city of Almaty, the Hyundai plant will be opened with a capacity of 45 thousand units per year. The plant is open on the territory of the Industrial Zone. The volume of investments in the construction of a new plant amounted to 25 billion tenge. Design capacity is 30,000 units per year. The second stage and the production of the first car, released with technological operations for welding and body painting, is planned in September 2020. The company will create up to 700 new jobs in the production. Building a dealer network in the regions of Kazakhstan will positively affect the development of SMEs.

At the end of January this year, in the presence of the Prime Minister of the Republic of Kazakhstan A. Mamin, a cooperation agreement was signed between Uzavtosanoat JSC and KazakhExport Export Insurance Company JSC, as well as an agreement on the supply of car kits between SaryarkaAvtoProm LLP and JSC UzAuto Motors."

In the future, in the automotive industry it is planned:

continue to work to increase the share of local content by switching to new agreements on the industrial assembly of vehicles from the beginning of 2021;
to develop production cooperation with partners of Kazakhstan automakers, including the production of automotive components;
continue to master the production of electric vehicles.