EURO-2 BECOMES LAW

From now on, vehicles that do not meet the Euro-2 environmental standard will not be allowed into Azerbaijan. A new procedure for importing used cars into Azerbaijan, or rather a ban on imports of cars that do not meet the Euro-2 standard, came into force on 1 July. These vehicles will have to either remain abroad or go out of existence or, to put it simply, be dismantled for spare parts.

Now, before authorizing a car import, a customs officer will check both the car and the database of cars already certified in Azerbaijan. Then, if it is impossible to determine the vehicle's environmental rating, or if the owner disputes the rating, he will have to contact the local authorities to obtain a certificate of compliance; this costs 20 AZN.

Cars over 12 years old to be tested

In order to adopt the Euro-2 standard, the Azerbaijani State Committee for Standardization, Metrology and Patents has developed a national AZS standard447-2010, called "Requirements on emissions of pollutants by motor vehicles used on the territory of Azerbaijan". This provision requires that vehicles imported into Azerbaijan are tested before use. The new standard will not apply to vehicles that arrived in the country before its adoption, or to unique cars - with this kind of car you can travel abroad without worrying that you will have to re-certify when you return.

New vehicles that have not been imported and cars more than 12 years old will be tested. The tests will be conducted at Interior Ministry laboratories.

Under the Euro-2 standard, cars manufactured after 1996 and imported into Azerbaijan will be checked for emissions compliance as specified on the data sheet. Cars made before 1996 may be imported after some modifications to the engine.

Cars imported into Azerbaijan after 1 July 2010 will go through an additional annual inspection, alongside the annual mandatory examination. This does not apply to vehicles imported before 1 July - they will only go through the traditional annual technical examination.

"Purging" the automobile market

For the time being, the innovations apply only to newly-imported cars. The cars already on our roads will not be checked for compliance with Euro-2 yet. However, those that do not meet the Euro-2 standard will be gradually withdrawn from full use, says Ramiz Hasanov, head of the State Committee for Certification. For example, the first stage includes a ban on the import of cars that do not meet the standard, and the second stage - the application of specific measures to use previously imported vehicles which do not meet Euro-2.

In two years' time, it is planned to introduce the Euro-3 environmental quality standards for petroleum products in Azerbaijan. Then, the Euro-4 and higher standards will be introduced; this will help rid the market of vehicles that do not comply. Environmental standards will be improved in parallel with the quality of petroleum products in the country.

Currently, the only manufacturer of oil products in the country, particularly gasoline and diesel fuel, is SOCAR (State Oil Company of Azerbaijan). SOCAR CEO Rovnaq Abdullayev has previously stated that the company's gasoline and diesel fuels are fully compliant with Euro-2 standards. SOCAR plans to upgrade oil refineries to increase the quality of its fuel to Euro-3 in the near future.

SOCAR intends to build a complex including new oil and gas processing and petrochemical enterprises, in order to produce petroleum products to Euro-5 and higher standards.

Customs are ready for the innovations

The introduction of the Euro-2 environmental standard in Azerbaijan is necessary, first and foremost, in terms of environmental protection and transport security, says the head of the State Customs Committee, Aydin Aliyev. In addition to improving the quality of cars, its introduction will also mean compliance with fuel standards.

The State Customs Committee has acquired the necessary equipment and allocated special working rooms at customs posts in order to verify the emissions of harmful substances.

When carrying out customs clearance, there will be no restriction on the types of car, as it is the condition of the car that is being examined, said the committee head. However, cars that are of dubious quality will be sent for diagnosis.

What will the introduction of the Euro-2 technical and ecological standard mean for the state and the public?

Ecology

Of the expected results, environmental benefits take centre stage. The rapid growth in the number of vehicles in Azerbaijan, as in many other countries, soon took means of transport to the top of the list of air pollutants.

According to the statistics, motor vehicles in Azerbaijan emit about 691,200 tonnes of carbon monoxide per year. They regularly emit about 280 different harmful components, including carbon monoxide and nitric oxide. Many European countries affected by the problem have tackled this problem by introducing Euro standards.

The Euro standards are requirements for limiting the toxicity of exhaust gas emissions and improving the properties of fuel, and are primarily intended for automobile manufacturers.

Tax burden

One of the main issues is the impact of the introduction of the Euro-2 standard on car imports. According to Aydin Aliyev, car imports were increasing before 2008, but their number began to decline in 2008-2009. In January-May this year, car imports increased slightly, by approximately 3-4 per cent. The State Customs Committee believes that the new standards will not entail a sharp decline in car imports.

The innovations will not affect the rate of customs duty on imported cars that meet the Euro-2 standard. "T here is no question today of increasing customs duties on imported cars that meet the Euro-2 standard," said Aliyev. The state committee had earlier proposed an increase in tariff rates due to the anticipated reduction in revenues following a reduction in the total volume of imports.

As before, cars "aged" one year will be subject to customs duties of $0.4 per cubic centimetre of engine capacity, while cars older than one year will still be charged $0.7 per cubic centimetre of engine capacity. The levels of excise duty and customs fees, as well as other taxes and payments, will also remain the same.

Supply and demand

The introduction of the Euro-2 standard will create the conditions to update the country's vehicle fleet. As for older cars, their owners need not worry - this standard has operated in European countries since 1996, so even 10-year foreign-made cars meet it. Cars already registered on the territory of Azerbaijan will run to the bitter end, despite their age, without any consequences for their owners, except for the cost of repairs.

However, in anticipation of the innovations, Baku's car market was unusually passive in May. According to a survey by the Participants in the Property Market public association, the four months since the beginning of the year saw increased passivity in Baku's car market. In May, the number of visits to auto dealerships also declined, leading to a 1.8 per cent decrease in the number of deals. The average price remained unchanged in May, still at 15,380 dollars. In May, car market liquidity reached its lowest level for three years.

Overall, there were more than seven thousand cars on the market - of which 36.1 per cent went on offer in May, while the remaining 63.9 per cent were held over from previous months. The two-month influx of old cars into the market clearly stabilized in May. Mercedes-Benz cars, which have dominated Baku's car market for three years, rose by a further 0.4 per cent in May and accounted for 38.96 per cent of the market's total portfolio.

We should note the major changes in the annual distribution of vehicles offered on the second-hand market. Studies show that the decision to tighten environmental requirements for imported cars has seriously affected the structure of the portfolio of supply by year (see the table). Experts believe that in the near future the automobile market will be dominated by cars made after 2003.

But do not panic: no-one is going to check your vehicle's compliance with the Euro-2 standard on every corner. These standards are designed for the manufacturers of motor vehicles, and it is impossible to check their compliance on the road. Nor will the new standards affect the cost of new vehicles imported into Azerbaijan or produced in-country.

For major participants in the car market - official dealers and manufacturers - there are no significant barriers or additional costs for transition to the Euro-2 standard: all "white" cars have long met its requirements. Moreover, there are already cars that meet Euro-2 standards and the more stringent Euro-3 and Euro-4 standards in Azerbaijan. It is normal practice for all countries with civilized markets. Even modern products of the Russian car industry, including commercial vehicles, comply with Euro-3.

According to the experts, we should expect a fall in the cost of old cars on the domestic market. This is already being observed. It is clear that the number of people wishing to buy a car that can be potentially "blacklisted" will fall in the near future.