Uzbekistan's Car Industry Takes a Beating from Russia’s Custom Union
The Russia-led Customs Union has never hid its protectionist mandate. It’s been called Vladimir Putin’s Soviet Union-lite for a reason: Formerly Soviet states that don’t sign up will be isolated or pushed around until they do. Just look at Ukraine. Now, new regulations on car imports that came into effect last month will protect the car manufacturing industries in all three members – Belarus, Kazakhstan and Russia. But they will specifically hurt one of Uzbekistan’s few successful joint ventures, a GM plant in the Fergana Valley that has thrived off exports to Russia and Kazakhstan. Uzbekistan has previously expressed only the most tepid interest in the Customs Union. For Tashkent, the new rules show that staying out can hurt. Kazakhstan's Kolesa.kz online car-sales platform reported on February 20 that Customs Union technical regulations have banned imports of some of the bestselling cars in Kazakhstan, including the Uzbek-made Chevrolet Nexia and Matiz.The regulations, which came into force on January 5, require imported cars to have at least one air bag, an anti-lock braking system, specific attachment points for child-safety seats, and daytime headlights, among other things. GM Uzbekistan’s Nexia and Matiz have none of these features, Kolesa.kz said. Cars produced by Customs Union members are exempt from the regulations until 2015."We are now selling leftovers in warehouses,” Kolesa.kz quoted an unnamed Kazakh dealer of Uzbek cars as saying. “The [Uzbek] plant will hardly be able to reequip these models [to meet] these technical requirements." GM Uzbekistan produced 251,342 cars in 2013, up 4.5 percent on the previous year, according to official statistics cited by 12news.uz. Over a third were sold in Russia and Kazakhstan: Russia imported 60,829 Uzbek-made cars in 2013, according to the Automobile Manufacturers Committee of the Association of European Businesses in Russia, whereas, according to Kolesa.kz, over 23,300 Nexia and Matiz cars were sold in Kazakhstan. While the latest regulations will deprive GM Uzbekistan of hard currency in the short term, they may finally help the company satisfy domestic demand. In the past, the Uzbek-made Chevys have been difficult to buy in Uzbekistan due to GM’s desire to export as many as possible and high local demand (imports are slapped with high taxes). Until GM retools the production lines on these simple cars, it looks like export is out of the equation.