Automarket of Kazakhstan: lack of high-quality and low-cost cars is in focus

A car, as a vehicle, plays a significant role in the economy of time and increasing labour efficiency. The state of the automotive market indirectly describes the social and economic development of the country.

Approximately 3.9 million passenger vehicles were registered in Kazakhstan as of January 1, 2023. The number of cars has grown almost 3 times over the past 20 years. In addition, there are many cars with foreign license plates in the country. The bulk of them is driven by Kazakhstan citizens.

We have analyzed the automotive market, including clarifying the reasons for the foreign-registered cars. From the end of January to July 1, 2023, the legalization of foreign cars imported into Kazakhstan before September 1, 2022, is underway.

Most of the registered cars were produced more than 10 years ago, they account for over 70% of passenger vehicles. The second largest category consists of cars older than 7, but not more than 10 years. This is since this category is refilled mainly through import and production.

How was the automotive market of Kazakhstan formed?

The replenishment of our car market is due to import and production as in the whole world. We have considered these two components in retrospect since 2005.

The production of cars in Kazakhstan had an insignificant volume in the range of 2-3 thousand cars per year until 2010 – the market was replenished mainly through imports. At the peak of 2006 and 2007, imports amounted to about 400 thousand cars per year, mostly were used cars "older than 10 years" from Germany and Japan.

Due to the ban on the import of right-hand vehicles into the country, the volume of market receipts decreased in 2008 . However, the offer was quickly rebuilt, and used 5-7-year-old cars from the USA began to arrive in Kazakhstan.

The replenishment of "10 years and older" category from imports stopped after Kazakhstan joined the Customs Union in 2010. And to import such cars due to significantly increased customs duties and other technical regulations tightening become unprofitable. Since that period, the replenishment of "older than 10 years" cars in the market of Kazakhstan has become possible mainly through the natural ageing of cars already present in the country.

We can highlight the situation of 2014-2015, when due to the violation of the tenge/ruble long-term parity (from 5.5 tenge per ruble to 2.3), a large number of cars, both new and used, were imported from Russia at a relatively low price. Official auto dealerships have also imported cars from Russia during this period and have been selling them for several years after. In this regard, the volume of official sales exceeded the actual volumes of car imports and output in subsequent years.

Importing cars older than 3 years into the country was very expensive after the introduction of the initial registration and recycling fee in 2016. And since that, the automotive market of Kazakhstan has been filled mainly due to domestic production or the import of new cars.

How do sales react to prices?

Obviously that one of the important criteria for sales in the market is still the retail prices. Thus, 2006-2007 were described as record-high volumes of replenishment of the country's automotive market - about 400 thousand cars per year at an average price of $ 3-5 thousand (it is 1.3-2.2 million tenge at the current exchange rate). This corresponds to the current demand for cars in "10 years and older" category.

Then, with a car price of 15-20 thousand US dollars (at the current exchange rate of 6.7-8.9 million tenge), demand is reduced by almost 2 times and amounts to about 150-200 thousand units per year.

In 2016, the replenishment of the domestic market significantly decreased with the increase in prices – imports and production amounted to 79 thousand cars per year (significantly below the average level). At the same time, the import price and the cost of cars produced in the Republic of Kazakhstan have almost equalled: about 7.5-9.5 million tenge (16-20 thousand US dollars).

How are things on the secondary market?

Low sales volumes of new vehicles in Kazakhstan and high prices for them do not meet the demand for all categories of citizens in the secondary market with the required quantity. In this regard, more than 60% of purchase and sale transactions are made with used cars, and more than 10 years have passed since their release. There is a shortage of high-quality and low-cost cars on the market because this segment has ceased to be regularly replenished by imports since 2016.

Approximately 170 thousand cars were listed for sale on the website with ads, and 65% of them were aged more than 10 years.

We also note that 20% of all put-up for-sale cars are bonded, which means they are with registration numbers from other countries, mainly the EEC countries. Moreover, the bulk of them falls on cars older than 10 years. A simple statistical extrapolation of these data indicates that there are about 500 thousand such cars in Kazakhstan. The number of registered cars decreased by about the same amount in the "10 years and older" category from 2014 to 2021.

The greatest number of bonded cars on the secondary market is Toyota and Lada. They make up 24% and 54%, respectively among the cars of 1980-2010. This means that almost half of Lada cars have a foreign registration.

The secondary market prospects

Small cars (B and C class according to the European classification) have been mainly sold through official sales channels for several years. Consequently, the used car market will mainly consist of small cars aged 10 years or more and diverse cars aged than 30 years after a short while.

The interesting points are:

• The price of a 20-year-old Toyota roughly corresponds to the cost of a new Chevrolet.
• Mercedes-Benz and Volkswagen cars are popular in the secondary market and are practically not purchased in the segment of new cars. At the same time, the most popular models of these brands are 30 years old or older.
• Lada ranks 2nd in car offerings in the secondary market, while even at a relatively low price in the primary market it significantly loses to sales of other brand cars that are more than twice as expensive, for example, Toyota.

Decommissioning

As we noted earlier, the domestic automotive market was steadily replenished mainly with aged vehicles until 2010, the number of registered cars was decreasing annually due to their tear wear and despite the annual replenishment with new cars. This explains that decommissioning is faster than buying new vehicles. So, cars decreased by 200 thousand units from 2014 to 2021, while about 800 thousand cars entered the market during the same period.

At the same time, the number of registered cars amounted to 3.96 million cars in 2022, which is almost equal to the peak value of 2014 of 4.0 million cars. However, the replenishment of the general automotive market of Kazakhstan for all age categories remains negative. Thus, the car decommissioning is still ahead of its replenishment.

The main decommissioning comes to "older than 10 years" cars. This category decreased by 500 thousand units from 2014 to 2021.

The market in 10 years

Thus, based on the carried-out analysis and maintaining the trends we have identified, the market will look like this in 10 years (see infographic below).