Experts talk about Kazakhstan's car market amid Russian ruble depreciation

The year 2014 was been a special one for Kazakhstan’s car market especially given the recent depreciation of the ruble. Experts told Tengrinews about its effect on Kazakhstan's car market in 2015.

The ruble began falling amid the sliding prices for oil, which is one of the main exports of Russia. Western sanctions imposed on Russia worsened the situation further. The crisis of the Russian economy inevitably influenced the global financial market and economy.

On December 16, the Central Bank of Russia increased its key interest rate from 10.5% to 17% in an attempt to slow the depreciation of the Russian ruble (this was the sixth attempt in 2014), but the move resulted in sharp swings in the exchange rate and the ruble continued falling. This made Russian goods more affordable for citizens of neighbouring Kazakhstan and more attractive then their domestic products. Many people, largely those living in northern regions of Kazakhstan bordering on Russia, started travelling to Russia to buy home appliances, cars and even apartments.

This situation was probably beneficial for people, but not for the domestic market.

Editor in chief of Kazakhstan’s auto magazine Za Rulem Kazakhstan (At the Wheel Kazakhstan) Alexei Alekseyev said that the situation with the depreciation of the ruble had a significant effect on the car market of Kazakhstan. "In mid-December, some automakers (in Kazakhstan) sharply reduced the spending, sent the staff on unpaid leave, withdrew advertisements from the media. It makes no sense, they say, sales are zero. (...) But it will end when new cars purchased at the old exchange rate, will be completely sold out. The companies will make their next purchases at the new rate and the price of cars in Russia will soon grow by 15-25 percent. To level the field Kazakh auto dealers made unprecedented steps in late December lowering prices of some of the models models by 3,500-10,000 dollars," the expert said.

Kazakhstan’s car market will at best recover in the end of Q1 2015. As a result, the total number of sales of new cars in Kazakhstan will make 130-140 thousand next year. “This, of course, will occur if no other shocks happen. And this forecast is an optimistic scenario. (…) The lowered prices will not stand for long. Once the prices are increased in Russia, our dealers will change their prices, too,” Alexei Alekseev said.

Meanwhile, Head of the Independent Automobile Union Eduard Edokov also believes that the country's car market was hit by the depreciation of the ruble. “We saw that our dealers' appetites were huge, as they have reduced the price of cars by 10,000 - 15,000 dollars. This means that before this happened they were enjoying a margin of 30-40 percent and it was a common practice for them," he said in an interview to Tengri FM radio. He also noted that the rush around Russian cars negatively affected Kazakhstan's domestic market of used cars.

According to Edokov, no positive trends could be expected in 2015. “The global economic situation, the lowering oil prices – all these will either way affect Kazakhstan’s car market. In terms of sales, I think, next year will be worse than this one. Prices for new cars will not increase much. The market will either be in stagnation or see a decrease in sales. Simplified procedures of import of cars in the Customs Union’s countries (Russia, Kazakhstan and Belarus) that will come into effect on January 1. This will have an effect, too. Mainly because of abolition of indirect taxes - a value-added tax or excise duty on cars with engine capacity of more than three liters. A unified standard for vehicle passports will also be introduced. As a consequence, a large number of cars at reasonable prices may be imported from Russia  to Kazakhstan,” Edokov said.

The Association of Kazakhstan’s Auto Business (AKAB) predicts that the number of players at Kazakhstan’s car market may change in 2015. The reason behind this is that some models responsible for the main part of car imports to Kazakhstan are no longer produced in Russia. For example, assembly is suspended at Ford and Peugeot Citroen Mitsubishi Automotive Russia plants (assembles Citroen and Mitsubishi models) and at Moscow-based Renault plant.

In addition, according to AKAB, Volkswagen factory in Russia may be suspended soon, and Kaliningrad-based Avtotor auto giant and the GM plant in St. Petersburg will cease production in early January 2015. "In this situation, the Kazakhstan market (of cars) will have hard times, but at the same time the domestic producers will have a chance to win a larger market share in Kazakhstan, and expand their exports to the expanding Customs Union countries, which is now accepting new members (Armenia and Kyrgyzstan)," AKAB said.

According to the association, 150,561 cars were sold in Kazakhstan in 2014. It was a 0.3% increase compared to the previous year. But in November 2014, when the situation with the Russion ruble became really bad, Kazakh car dealers sold 13,673 cars, which was 19.21% less than the sales in the same period of 2013.

Many car centers in Kazakhstan have lowered car prices. Experts believe that it was done in response to the depreciation of the ruble and falling prices for new cars in Russia. But the car centers themselves (Nissan, Toyota, Bipek Auto, Asia Auto) insist that it has nothing to do with the decreasing value of ruble.

Reporting by Vladimir Prokopenko, writing by Assel Satubaldina, editing by Tatyana Kuzmina