**** 1

Report
The Prospect of Auto Industry Development in Kazakhstan
Kazakhstan Machine Builders Forum
April 16 2013
Astana, Kazakhstan
Young-suk Hyun Ph.D
Hannam University Daejeon, Korea
email : [email protected] skype: yshyun88
mobile : +82-10-4270-1519
YSHYUN, Machine Builders Forum :
16 April 2013 Astana
1
The Prospect of Auto Industry Development in Kazakhstan
I. Introduction
II. Demand Forecast of Kazakhstan Auto Industry
III. Auto Industry Policy Options and Lessons
IV. Policy of Kazakhstan Auto Industry
V. Discussions
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I Introduction
Outside CIS (China, EU)
CIS (Uzbekistan, Ukr… )
CU
Russia
Belarus
Kazakhstan
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West and East Bound Move to Kazakhstan
Russia
2.0 million prod (2011)
Customs Union 2010
- Gov. Strategy 2020 for Russian
Car Industry
- Industrial Assembly Agreement
East Bound Move
Kazakhstan
9,550 prod (2011)
Risk of Nutcracker
China
West Bound Move
18.4 million prod (2011)
WTO 2013 (KZ)
Cheap Price
Largest producer & market
M&A
Long-term Auto Industry Dev. Plan
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Strategic Path and Natural Path
Value Added, Job Creation, Industrialization
Large
small
River
Strategic path
Natural path
Ship
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□ Kazakhstan’s Access to the WTO
Kazakhstan’s accession to the WTO will become one of the most important stages on the way to integration of
the country into the global economic system.
But under the Customs Union regime, Kazakhstan cannot but follow Russia’s market opening schedule in negotiation with WTO.
It will lower common customs tariffs and boost import demand.
□ Impact and Policy Implication
Lower Tariff
Lower Price of Foreign Automobile
Foreign Autos get More Competitive Power
Gain More Kazakhstan’s Auto Market
Domestic Car Makers are difficult to survive
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II. Demand Forecast of Kazakhstan Auto Industry
Assumption of Vehicle Demand Forecast in Kazakhstan
High Growth
More than 6%
Middle Growth
5%~6%
Expand until 2020
Expand until 2016 and s Expand until 2016
lowdown
Strategy of
Auto company
Aggressive
medium
Less aggressive
Energy Price
Lower
Stable
Higher
Government Support
Strong
Weak
No
Annual GDP Growth
rate
Road Infrastructure
Low Growth
Less than 5%
Aggressive
Mid Growth
High Growth
No Growth
Low Growth
Company
Strategy
Less
Aggressive Weak
Government Support
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Strong
7
Summary of KZ’s Vehicle Demand Forecast in 2020 (Units)
High Growth
New Vehicle
Mid Growth
Low Growth
395,000
248,457
192,000
300,000
168,447
130,000
bus
20,000
16,010
12,400
truck
75,000
64,000
49,600
Used Vehicle
125,000
62,500
48,000
Total Demand
520,000
310,957
240,000
passenger car
Summary of Three Growth Scenarios in 2020
2011
2012
Total New Vehicle
Demand
63,607
130,000
New Vehicle Import
(import ratio)
55,000
110,000
1,229
8,000
1,000
20,000
Export
Local production
Reference Case
2020
Optimistic
395,000
Neutral
248,457
Pessimistic
192,000
158,000
(40%)
70,000
307,000
124,227
(50%)
50,000
173,728
115,200
(60%)
30,000
106,800
Romania
Vietnam
Korea, Uzbekistan
Iran(IKCO)
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III Auto Industry Policy Options and Lessons
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Malay
sia
China
Russia
Thailand
Brazil
Slovakia
Uzbekistan
Korea
WTO
1995
2001
2012
1995
1995
1995
no
1995
Firms
Local
MNC
MNC(state
JV)
Local
MNC
Local
MNC
MNC
MNC
State
JV
Local
MNC
Total 27
CV 9
Local 2
proton,
Perodua
25
Local Geely,
Chery, BYD
25
Car 17
CV 8
Local
GAZ,Kama
z,,,,
15
Japan
EU, China
19
US, EU
Japan
3
car only
France,
Korea
Germany
1
Uz-GM
7
Car 5
CV 2
Local :
Hyundai
Kia
Major
Produc
ts
local
MNC
MNC
Local
local
MNC
MNC
MNC
MNC
MNC
Local
MNC
Policy
(WTO
after)
Product
tax
Local
content
Local content
Recycling
tax
Japanese
production
hub
MNC
dependent
Export to EU
Import prohibit
NO WTO
Special
Consumpti
on Tax
Automobile
tax
Recycling
tax
Local
content
product tax
(VAT)
Remark
s
Self
reliance
Large
domestic
demand
Large
potential
demand
Large
population
Large
population
EU
CIS
Gov Initiative
Gov.
1970s
Prod
2011
Car
488,261
CV
45,254
Car
14,472,416
CV
4,032,698
Car
1,738,163
CV
250,757
Car
537,987
CV
919,808
Car
2,519,389
CV
1,013,227
Car: 640,230
only
Car 222,022
only
Car
4,221,617
CV
435,477
2020 Plan
(2010)
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Kazakhsta
n
2013
Local
MNC
7,000
10
WTO and Gov Auto Industry Policy
Policy
WTO
Access
1.MNC admit and local Early 1995
model dev
WTO early
MNC admit and
Local dev
WTO late
Late
more late
Country
After WTO
WTO,
remarks
Malaysia
-local content
-product tax
protest
China
Dec. 2001
Russia
Aug. 2012
-local content
protest
-recycling tax
protest
3. MNC admit and no
local model
Early
1995
Thailand,
Brazil
Slovakia
- no violate
4. MNC admit
And no local model
NO WTO
No
Uzbekistan
-Import prohibit
-export promotion
NA
5. MNC admit
But Strong Self
Reliant
Early
1995
Korea
-special consumption
tax (purchase)
-automobile tax
(operating)
R&D,
education,
business,
tech support
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Establish Long-term Development Plan
□ Korean government has supported holistically for the automotive industry.
- Government’s support is important to cross the chasm.
Performance
Korea
Mainstream
Leaf frog
chasm
(Death Valley)
Developing
countries
Fall Behind
Chaos (Market Opening)
Time
Infant
Growth
Mature
12
Lessons from Korea’s Experience WTO Local Brand
1. Korea : 10th auto producing country (2.52 mil. production, export 978
thousands in 1995 when accessing WTO
2. Government strong initiative in supply and demand policy to dev local
model in 1970s by local firm Hyundai Motor
3. Before WTO Korea, Gov could implement every policies to support local
model and local maker : (ref: KOICA Report to Kazakhstan Gov. Feb. 2010)
4. Hyundai Motor selected “self reliance strategy” to develop local model with
high risk taking entrepreneurship.
5. Korean Gov
1) special consumption tax (purchase tax : product Tax)
2) automobile tax (operating tax) to regulate foreign car import - heavy tax for
large cars (most import car) after WTO
3) Emission regulation as to regulate import of large foreign car abolished as
of the FTA with USA in 2012
8. Lessons
- strong gov. intervention : industry policy, local content, local model dev
- without local model, hard to increase local content
- but it was experience in 1970, 1980s before WTO
13
- rapid catch up strategy under GATT
China after WTO (Dec 11 2001)
1) Import Quota ; 1986-2005 (20 years) even after WTO Dec 11 2001
2) Local Content Issues 1 :
WTO 2001
over 60% foreign parts vehicle assembled in China
(below 40 local content vehicle)
 import duty (Custom tax) is same as complete vehicle 25%
2006 EU, USA proclaim to WTO as Unfair Trade
2008 China defeated but protest again to prevent simple screw drive foreign vehicle
plant in China
2009 Abolish
3) Local Content Issues 2:
by 2005 some parts custom duty 30% ( other parts 13-17%)
2006 to comply WTO complete vehicle 25% parts : 10%
4) Local Brand Vehicle Target (2006) 40% (2005)  60% (2010)
5) regulate foreign investment
2001-2008 limit not over 50% of foreign investment in automobile industry not parts ind.
6) Vehicle Safety Regulation (2005) : 9 regulations (back mirror, door lock,
interior materials …
7) Minimum Export Ratio Policy (2006) : new auto plant must meet Min export Ratio
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IV. Policy of Kazakhstan Auto Industry
Extensive inter-industry relationships
<Figure > Unit Structure of Korean Automobile Industry (2000)
Auto Industry
Steel
70
Machinery
Rubber &
plastic
60
50
Electronics
Chemical
40
1 .농 림 수 산 품
3 .음 식 료 품
5 .목 재 및 종 이 제 품
7 .석 유 석 탄 제 품
9 .고 무 및 플 라 스 틱
1 1 .철 강
1 3 .금 속 제 품
1 5 .전 기 전 자 기 기
1 7 .자 동 차
1 9 .기 타 수 송 장 비
2 1 .전 력 가 스 수 도
2 3 .도 소 매
2 5 .운 수 및 보 관
2 7 .금 융 및 보 험
2 9 .사 업 서 비 스
3 1 .교 육 및 연 구
3 3 .문 화 오 락 서 비 스
3 5 .기 타
30
20
10
35. 기타
34. 기타서비스
32. 의료 및 보건
33. 문화오락서비스
및 국방
31. 교육 및 연구
30. 공공행정
28. 부동산
29. 사업서비스
26. 통신 및 방송
27. 금융 및 보험
24. 음식 및 숙박
25. 운수 및 보관
22. 건설
23. 도소매
21. 전력가스수도
20. 기타제조업제품
18. 선박
19. 기타수송장비
17. 자동차
16. 정밀기기
15. 전기전자기기
13. 금속제품
14. 일반기계
11. 철강
12. 비철금속
10. 비금속광물제품
8. 화학제품
9. 고무 및 플라스틱
6. 인쇄 및 출판
7. 석유석탄제품
4. 섬유제품
5. 목재 및 종이제품
2. 광산품
3. 음식료품
1. 농림수산품
0
Source : Input-Output Table, Bank of Korea
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Industrialization
Kazakhstan
Basic Strategy
in Automobileof
and
Automotive Parts Industry
⊙
Basic Approach
Autom
obile
Supply
Demand
Machinery
Vehicle
Driver
: MES 20,000- 50,000
After
market
Parts
Demand Creation
Investment (Foreign/Local) Auto Industry
for auto plant
for parts Industry
Parts
Industry for
after market
Kazakhstan
CU
CIS
Kazakhstan
Machinery
Parts Industry
Manufacturing
Industry
Industrialization
of Kazakhstan
MES : Minimum Economic Scale
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Policy Options of Kazakhstan Auto Industry
1
2
Strategy
Country
Local Market
protect
Gov. role
Remarks
MNC Invest
Local Model
WTO access
protest
Malaysia
Chinese
Russian
-Recycling tax
-Product tax
-Local content
Gov: Local
model
Support
Policy
Many MNC firms
MNC Invest
No Local
Model
WTO access
and Follow
Thailand
Brazil
Slovakia
-Dependent on
MNC
How to meet
Russia,
China
Uzbekistan
Thailand :
Japanese
production hub
Local firms
Custom Union
1. Strategic path : Government Strong support
2 Natural path : Government Weak support
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Two Paths : Malaysia vs Thailand
Malaysia
Thailand
Basic Policy
Self reliance, Look East Policy in
1980s
dependent
WTO Access
1995
1995
ASEAN
ASEAN Member
ASEAN Member
Auto Maker
Local Maker.
Model
27
Local Maker: Proton. Perodua
Local Model : Proton,
15
No Local maker
No Local model : Toyota, Isuzu, Honda
Nissan . Mitsubishi
Gov Policy
2009 New Auto Industry Policy
Incentive for local brand
2007 Eco car Program
Incentive for foreigner Investment in
auto industry
Local Model Share
60% +
0%
Japanese model 90%
WTO
Against
Follow
Key Role Man
Mr. Mahatier (Advisor Proton)
Previous Prime Minister
2011 Production
2011 Export
1,193,000 units
Remarks
Lead Indonesia to start Timor Project
in mid 1990s but fail as of WTO dispute
( major : car )
1,457,795 units (major : pick-up)
733,950
2012 : 10th auto making country
Pick-up Export Base
18
Malaysian path
1. Gov Policy : strong gov. support for local maker, local model in 1980s “Proton”
to follow Korean Hyundai Path in 1970s [Look East Policy]
2. Technical Assistance from Mitsubishi Motor/Japan 1995 60 % local Brand
( Proton, Perodua)
3 Product Tax 2004 1.1
Auto Parts custom tax decrease for ASEAN countries
Product Tax Increase for imported vehicle, local vehicle assembled
by foreign makers
Product Tax is internal tax not WTO issues but national interest
4. Strong Man PM : Dr. Mahatier
“Hereafter 20 years, Malaysia needs protection policy for local model car
4. Against and argue WTO : 2009 10 Industry Policy
Used car Import prohibited/ 50% reduction of consumption tax for local model
/Old car support to buy local model
5. Free trade in 2006 : ten year after WTO
6. ASEAN member in competing Thailand’s parts industry Japanese support
7. Motivate Indonesia to start national car “Timor Project” in mid 1990s
Indonesia : Low local content / dependent on MNC Japanese makers
Screw drive factory
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Thailand Path
1. Gov Policy : weak support , no local maker , no local model
2. Japanese production hub for ASEAN countries
production 90% Japanese Brand
4. 2007 Eco car program
below 1300cc gasoline 1400 cc diesel car
500 Million Baht Invest
100,000/ year within 5 year, engine, core parts in Thailand
 product tax 30% discount
-> no corporate tax for 8 years
-> no Tariff for Machine and facility for auto plant
induce : Honda, Susuki, Nissan, Mitsubishi, Toyota
4. Relatively strong parts industry by Japanese makers
5. ASEAN member in competing Malaysia
6. 0th auto making country in 201 2
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CU and WTO to Kazakhstan’s Automobile Industry
Free Trade Major
Policy
Weapons and Strategy
to KZ
Influence on Kazakhstan’s auto Indus
try (new vehicle Import portion,
Data: Custom Office Kz)
2010
Custom
Russia
Union (CU)
-East Bound Move
Car
2011
Car
-Russia’s 2020 Plan/Govern Truck 46.4 %
Truck 50%
ment support
Bus 21.6%
Bus
59.6 %
-Foreign alliance
WTO
China
-West bound Move
Car
Car
-Cheap Price
Truck 29.6%
Truck 32.8%
-World factory (largest produ Bus
9.3
Bus 8.2
cer, largest market)
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Competitors Analysis of Kazakhstan Automotive Industry
Specification
Competition
Current competitor
Potential competitor
Source of Compe
titive Strength
Car
-
1500cc
Uzbekistan
China
Low price
Uz-Daewoo
1500-1800cc
Russia Lada
Russia, China
Korea
1800-3000
Japan, Toyota
Japan, German
Quality, Brand
Korea
Over 3000
Japan, Toyota
Japan, German
Russia
Russia, China
5 ton
Russia
Russia, China
5-20 ton
Russia
Russia, China
Over 20 ton
China
China
Special
China
China
Vehicle*
Belarus
Bus
Truck
-
Quality, Brand
22
Forecast
1. Russia
-Renault allied with AvtoVaz
will export vehicles to Kazakhstan unless Kazakhstan can
not develop her own automobile industry.
- Kazakhstan could impose ‘recycling tax’. But that will be hindrance to Kazakhstan’s
automobile export. Governments of vehicle export countries will retaliate on vehicles
produced in Kazakhstan (ex: China)
- How Meet Foreign and Russian vehicles made in Russia exported to Kazakhstan
2. China
China will build auto plant in Belarus, Russia and Kazakhstan to use CU and WTO
: Commercial Vehicle, car
3. Uzbekistan : small car export or assembly in KZ
4. EU
: car assembly plant in Kazakhstan
5. Asia : Korea, Japan : car and commercial vehicle (Bus Truck)
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Kazakhstan’s Policy Options
1. Gov Strategic Decision : Malaysia or Thailand Path
2. WTO (ref : China and Malaysia case)
1) More extended grace time for developing country
2) Financial Support : Corporate Tax
Recycling Tax, Product Tax, Consumption Tax
3) Tariff reduction for Plant and facility for auto plant in Kazakhstan
4) Local Content Regulation : preferential tariff for high local content car
5) safety, emission regulations (Technical Center)
3. Industry Structure : number of auto makers  increase
so many as of dealer’s perspective
4. Export Models  Local Model
- Lada Model to export to CU and other countries
- SUV Model -Commercial Vehicle
5. Local/ Foreign maker : start foreign model but target local model in the long
CAUV : Central Asian Utility Vehicle : [ref: Toyota Kijang in Indonesia]
6. Parts Industry and Localization : Local Content Regulation, Joint Venture
7. Technical regulation/standards (GLONASS system, Technical Center by Gov. )
8. What is Kazakhstan’s Ideal Picture in the future :
- Contingency plan
- Steering and Advisory Committee
24
V. Discussions
Value Added, Job Creation, Industrialization of Kazakhstan
Large
small
River
Strategic path
Natural path
Ship
1. How to protect local market under CU and WTO ?
2 How to take advantage of scale economy ?
2. How to increase value added in Kazakhstan ?
3. How to access Local content, local model
25
Thank for Your Attention
Young-suk Hyun
Ph.D
Hannam University, Daejeon, Korea
[email protected], skype: yshyun88
mobile : +82-10-4270-1519
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16 April 2013 Astana
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