Car market ranks second largest in country

Over the past few years, many decisions affecting the car market, the second largest market after the real estate, has been made in Azerbaijan.

Ramil Osmanli, director of the Expert Center for Real Estate, said at the multimedia conference held in the media center that import of cars to Azerbaijan has significantly decreased.

The expert said the decision to secure loans for the automotive market significantly reduced lending on it.

“This market has always been in the field of view of the relevant state structures and executive bodies. Over the past three years, the country has made many decisions affecting the automotive market. So, in 2014, the Central Bank decided to secure loans in the car market, which had an impact for the allocation of loans in this sector, then new environmental standards were adopted, these and other decisions had a significant impact on the automobile market,” he said.

“Environmental standards, the transition to Euro-4 and the increase in fuel tariffs almost doubled over the past two years have had a very negative impact on car imports. Car imports in 2016 fell by almost six times, as compared to the indicators of 2012-2013,” Osmanli noted.

Commenting on the increase of customs duties on car imports, the expert noted that he considers this decision premature.

“Azerbaijan has not yet established its own production of cars, so this decision may lead to a reduction in the number of cars imported into the country,” Osmanli said.

The opening of the automobile plant Azermash, which is being built in the Neftchala industrial district on the basis of an agreement concluded between the Iranian Iran Khodro and the Azerbaijani Azeurocar, is planned for the first quarter of 2018.

The plant with a capacity of about 10,000 cars per year initially will produce four Iranian car brands – Dena, Runna, Soren and Samand.The cost of the project is estimated at $15 million.

Production of some spare parts is planned in local factories. For this, proposals will be made to the plants and if the plants receive positive feedback from the Iranian company, then the production of spare parts will launch.

The plant intends to cooperate with the Sumgayit Industrial Park and SOCAR’s new plant. Some 20 percent of the vehicles will be exported to CIS and Central Asian countries. First cars of Azerbaijan-Iran joint car plant are planned to be manufactured beginning from 2018.

He said that excise taxes rose in 2017, affected not only imports, but also car prices.

The expert said that in recent years Azerbaijan has significantly reduced the import of cars: in 2015, imports decreased by 2.5 times compared to 2014, and in 2016 by six times compared to 2014.

Since 2018, Azerbaijan has introduced new customs duties on the export and import of goods. The corresponding decision of the Cabinet of Ministers came into force on January 1, 2018.

In accordance with the previous fees, if the volume of the new car engine exceeds 1,500 cubic centimeters, a fee of $0.40 is charged for each cubic centimeter, for cars with an annual mileage of $0.70.

From January 1, 2018, customs duties for cars with an engine capacity of more than 1,500 cubic centimeters are calculated at $0.70 per cubic centimeter, and for used cars-$1.2.

For new and used cars with an engine capacity of less than 1,500 cubic centimeters, the import customs duty remained the same at a level of $0.4 and $0.7, respectively.

Further, the expert touched upon car tires and stressed that it is necessary to establish the production of this product.

He went on to say that at present there is a plant for the production of tires in Azerbaijan, but it has practically not been in effect since the collapse of the USSR.

“In Azerbaijan, there is a need to create such a production, since tires are one of the main parts of the car and play some role in pricing,” Osmanli said.

The expert noted that the increase in duties on imports of used tires is also aimed at stimulating domestic production.

“This decision plays an important role in supporting domestic production, but first of all it is necessary to create and develop this production,” the expert believes.

Starting from January 1, 2017, duties on the import of used tires for cars, trucks and buses are $10 per tire.