The mass exodus of Western original equipment manufacturers (OEMs) from Russia in response to sweeping sanctions following Russia's invasion of Ukraine is driving significant growth in the automotive industry in Central Asia. This expansion of production capacity aims to meet both domestic demand for vehicles and the demand in the Russian market.
Uzbekistan, key player in Central Asia's automotive industry, has also set ambitious goals. According to the recently adopted Strategy Uzbekistan 2030 program, Uzbekistan aims to produce 1mn vehicles annually by 2030. This substantial growth is expected to be led by Uzbekistan's largest carmaker, UzAuto, with additional capacities being launched by various international car manufacturers like Kia, Exeed, BYD, and Chery in the coming years.
In 2024, Uzbekistan anticipates that annual production will reach 500,000 vehicles due to ongoing capacity expansion efforts by UzAuto. Moreover, Russian car manufacturers Avtovaz and UAZ are reportedly exploring the possibility of establishing vehicle assembly plants in Uzbekistan.
Kazakhstan, the largest economy in the region, is taking steps to increase its vehicle production capacity significantly. Marat Karabaev, the Minister for Kazakh Industry and Infrastructure Development, stated that Kazakhstan is on track to boost vehicle production fivefold to 500,000 units by 2026. In 2022, Kazakhstan assembled over 100,000 vehicles, which is a record high and a 20% increase from the previous year. As part of a new strategy, Kazakhstan is moving away from semi-knockdown (SKD) kit assembly of imported vehicles and focusing on deepening industry localization.
Kazakhstan's goal is to fully meet its domestic demand for vehicles by 2024, estimated at 150,000 units per year. This shift in focus reflects the nation's ambitions to develop its automotive industry further and become more self-reliant in vehicle production.
Several significant investment projects have been launched in Kazakhstan's automotive sector this year. Kia, for instance, plans to build an assembly plant in Kostanay with an investment of $190mn, aiming for a capacity of around 70,000 finished vehicles per year. Additionally, an automotive plant for the production of Exeed and Geely is in the works, with a planned capacity of 80,000 finished vehicles.
Central Asia, with Kazakhstan and Uzbekistan at the forefront, is also strategically positioned to serve as a bridge between Europe and China through streamlined logistics. The Trans-Caspian route, a transport corridor that bypasses Russian territory, is expected to facilitate the movement of goods between the two regions.
Kazakhstan's President, Kassym-Jomart Tokayev, has predicted a fivefold increase in cargo flow along the Trans-Caspian route. This route's growth, along with other logistics projects, is projected to boost the share of the logistics industry in Kazakhstan's GDP significantly.
While some analysts believe that expanding production in Central Asia offers OEMs access to the Russian market through legal channels, there are differing opinions. Concerns have been raised that legal exports of European brands to Russia may be challenging, and such exports might require unofficial channels. The dynamic growth of the automotive industry in Central Asia reflects the region's emerging role in the global automotive landscape and the unique opportunities it offers to OEMs and local markets.
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