Kazakhstan’s largest automobile manufacturer is now majority-owned by a Chinese company that is to pump $1.1bn into the enterprise.
A 51% stake in Saryarka AvtoProm has been acquired by transnational state company China National Machinery Import and Export Corporation (CMC), a subsidiary of China’s Genertec, under an agreement signed on December 12, according to the official website of the prime minister of Kazakhstan.
Though it boasts Central Asia’s most dynamic economy, Kazakhstan has to date shown little prowess or ambition in automaking. Car manufacturing in the country of 18mn has largely focused on domestic market demand and has not moved beyond relatively low output levels—the annual auto production level roughly ranges between 20,000-30,000 units.
The newly formed Chinese-Kazakh joint venture is to lead to an increase in locally-sourced content in Kazakhstan-manufactured cars to 50% and raise the annual production of Kazakh cars to 100,000 units. Such a boost would set the country on course to rival the only other major regional car manufacturer, Uzbekistan. For comparison, Uzbekistan’s car production, via its US-Uzbek joint venture GM Uzbekistan, stood at 135,470 units in 2017.
Kazakhstan’s First Deputy Prime Minister Askar Mamin, who attended the signing ceremony with CMC, said the project would boost Kazakhstan’s car export potential, initiating regional competition with Uzbekistan in car exports.
Saryarka AvtoProm is to produce JAC, Ankai, Howo and Hanteng cars—all of which are Chinese brands—under the agreement. The idea is to gain a unique advantage in accessing the massive Chinese market. Much of Uzbekistan’s car production is exported to Russia, Ukraine and even Kazakhstan, among other markets where Chinese brands do not have a strong presence. According to current strategies, Kazakh-made and Uzbek-made cars may hardly clash with each other.
Diversifying away from hydrocarbons
The CMC/Saryarka AvtoProm JV is also part of Kazakhstan’s involvement in the huge One Belt One Road (OBOR) industry/trade infrastructure initiative of China and forms part of the ongoing Kazakh effort to diversify away from over-reliance on hydrocarbon exports.
China’s presence in Kazakhstan and Central Asia as a whole is relentlessly growing. A big proportion of China’s OBOR investments are concentrated in logistics and infrastructure as Beijing wants to see modern-day ‘Silk Road’ trade transit hubs constructed in the region for the export of its goods, particularly to European markets. Yet China also sees Kazakhstan as a potential exporter of “ecologically clean” food and agricultural products to its market, something Kazakhstan is betting on with a substantial diversification into agricultural production.
Kazakhstan is also currently home to car plants owned by Azia Auto and Agromash Holding. Like Saryarka AvtoProm, these two carmakers produce foreign car brands. Their output includes Lada, Kia, Hyundai, Skoda, JAC, Geely, Chevrolet, Peugeot, Toyota and SsangYong models.
CMC bills itself as a “major international designer, contractor for project management services and service provider in the automotive industry”. Genertec is a state conglomerate active in machine building, engineering, construction, pharmaceuticals and real estate. The company says it has an “annual turnover [of] $31bn” and an export investment portfolio of $180bn.