March 16, 2015
ECONOMY..... Auto Industry of Uzbekistan: In the Face of Crisis
Domestic auto industry has faced certain predictable problems. The demand for its products in major export markets in Russia and other CIS countries started ‘shrinking’ at the result of the collapse in oil prices.

Under these conditions, the automotive industry of Uzbekistan has to take nonconventional but optimally effective solutions to not just hold its ground in the attained segments, but also to press the competitors.

Experts say that any crisis is always a good opportunity for the development with a correct approach. The market ‘washes out’ inefficient companies, thus opening space for other players. Today, the conditions of the falling demand for cars in Russia, as a major importer of Uzbek cars, toughen the competition between the parties. So, there is a need to attract a customer with additional shares, options and discounts. This means that the manufacturer actually reduces its profits in advance by offering the better product for less money.

How to surpass the unplanned expenses? The answer is simple – it has to optimize production and reduce production costs through the introduction of energy-saving technologies, development of localization, and effective management. The Uzbek automotive industry has gone this way, focusing on several areas of production. In order to avoid the further dependence on the Russian market, the local manufacturers of components and cars have intensified PR rallies in the other, somewhat exotic markets for Uzbekistan. For example, last year, Uzbekistan delivered its products not only to Azerbaijan, Belarus, Kazakhstan, Russia and Ukraine, but also to Brazil, Indonesia, South Korea and Turkey.

The diversification of exports has been grounded on localization of the necessary parts for cars. Along with the obvious benefits from cost savings in foreign currency for the purchase of necessary equipment, the manufacturers thereby reduced the cost of finished goods - the cars – and thus benefited in the fight against competitors. Dozens of cutting edge joint ventures, specializing in the manufacture of quality components and complex parts that are as good as their foreign counterparts, have been established under the localization program over the past five years. They were provided with certain tax and customs privileges, which also allowed the manufacturers enhancing the competitiveness of products at the expense of a significant reduction in production costs. There is an interesting fact: the majority of localization enterprises are located in the Fergana Valley, near the GM Uzbekistan. They produce more than 80% of the total number of components used in the assembly of passenger cars and commercial vehicles.

Last year, the Uzbek-South Korean joint venture UzChasis was the first among Uzavtosanoat enterprises to establish exports of spare parts to Brazil. In May 2014, it signed a contract for $4.5 million. Last year, the company shipped 34,500 items of goods to General Motors do Brasil Ltda worth more than $726,000. There is more to come. Specializing in the manufacture of automobile headlights and lamps made of polymeric materials for Nexia, Matiz, Spark, Cobalt and Lacetti cars, the joint venture is capable of producing up to 250,000 sets per year. Equipped with modern high-tech equipment by the foremost manufacturers of Korea, Germany and Japan, the company is unique and has no counterparts in Central Asia. Today, its experts are working on such promising projects as designing of a new lighting system for the domestic auto T-250, lights and lanterns under J-200 (Gentra) projects, B-150 (Damas) and rear light for MAN. Another Uzbek-South Korean joint venture of Uzsungwoo, which is engaged in production of stamped parts for new cars by GM Uzbekistan, also entered into an agreement for the supply of its products in Brazil in August 2014. Late last December the company carried out the first shipment of automotive components.

The domestic enterprises are working on unique projects. In the end of 2015 the Uzbek-South Korean joint venture Uz-Koram is planning to launch a new production line for the production of automotive components made of fiberglass. The larger batch of its products will be used for the assembly of the Gentra car. Besides, the company is considering the issue of development of production of various parts for Gentra seats.

The release of new models of cars is another interesting trend for expanding exports. For instance, a recently commissioned new car plant in Khorezm region is estimated to produce more than 40,000 Damas and Orlando cars annually. Also, according to the Uzavtosanoat company, it is currently working on the development of a new model of Labo. This representative of the utility car family in Compact LCV segment is highly in demand in the local and foreign markets. This class of cars is popular with commercial entities that deal with small deliveries or transportation in big cities. In the conditions of urban traffic congestion this compact and maneuverable car is truly irreplaceable. Therefore, the car has obvious export prospects.

It is worth to mention the domestic manufacture of specialized vehicles, which has been increasingly integrating to the foreign market. Last week, the Samarkand automobile plant produced a jubilee 20,000th car, an ISUZU NPR82 garbage truck, driven by compressed natural gas. The government of Uzbekistan intends to purchase 1,000 vehicles of this kind to equip specialized services by the end of 2015. Besides, the plant has launched the production of cars on compressed natural gas of three types: van, dump trucks and flatbed trucks.

ISUZU Motors Ltd. Executive Vice President Takanobu Furuta visited Uzbekistan on this occasion. He emphasized that the representative of the family, which is running on natural gas and was manufactured at Samarkand plant, was chosen to be the anniversary car. «It represents a new generation of environmentally friendly transport that meets high European standards that considerably enhance its competitiveness,» he said.

It is remarkable that, despite the temporary challenges arising from the situation on the global market, today the domestic automotive industry does not slow its run down. Te Joint Stock Company Uzavtosanoat continues implementation of a dozen of projects aimed at production of new components, cars and trucks, buses. Some two decades ago, few people believed that domestic cars might run Europe or the Middle East, while today it is commonplace. What are the prospects for tomorrow? Judging by the scale, the automotive industry is ready for a serious struggle for new markets.

(Source: «Uzbekistan Today» newspaper)


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