PRIVATE CAR

Yet another large-scale industrial project, the Azerbaijani-Iranian automobile plant Khazar is launched at the Neftchala Industrial District (NID) in Azerbaijan recently. It will be focused on creating a new automobile brand, which is assessed by experts as the most vivid example of public-private partnership in the development of national economy. On the other hand, it will also prove that local businesses are increasingly involved in production sector.

To support local automotive production

In fact, the start and development of automobile industry in Azerbaijan cover the years of independence. Several assembly projects have been launched during this period and not all of them were successful. Nevertheless, it was a productive experience, and most importantly - there is still a business interest in the industry. Government support results in new initiatives. Of course, it is still too early to talk about creating a 100% Azerbaijani car brand, as it requires attracting much more investment, technology, and expertise. However, it is quite possible to manufacture a competitive export product considering low production costs through the launch of joint ventures producing well-known brands.

Ganja Automobile Plant (GAP) launched in 2004 is the oldest enterprise in the car market of Azerbaijan. Its main production line mostly includes tractors and other agricultural machinery thanks to cooperation with the Minsk Automobile Plant. This year, the plant produced the ten-thousandth tractor under a brand name Ganja-Belarus. "There is a strong interest in these tractors. When I visit our regions and farmers, they highly appreciate these tractors. Now we are both exporting, and starting the manufacture of Ganja-Belarus in third countries," said Azerbaijani President Ilham Aliyev recently.

As for sedans, the manufacturer of this type of cars in Azerbaijan is the Nakhchivan Automobile Plant. The respective agreement with the Chinese corporation Lifan regarding the assembly of cars was signed back in 2009 at the China-Azerbaijan business forum. Launched in 2010, the plant manufactures five thousand cars annually as eight different models: NAZ-Lifan 720, NAZ-Lifan 820 (premium models), NAZ-Lifan 620, NAZ-Lifan 630 (sedans), NAZ-Lifan X50, and NAZ-Lifan X60 (SUVs), NAZ-Lifan 320 and NAZ-Lifan 330 (mini). However, the plant had big problems with the sales, so the real output was several times less. Up until the civil servant were instructed at the highest level to switch to local cars. It is reported that the sales of NAZ-Lifan cars has increased slightly in recent months but largely due to the growth of state orders.

President Ilham Aliyev has repeatedly urged the state authorities to support the local automobile industry by using its products. Recently, he has again returned to this topic considering a sharp increase in car imports, which, on the one hand, is a consequence of economic recovery but on the other hand means the leakage of foreign currency abroad. "Therefore, cars produced in Azerbaijan must be purchased at least by state institutions. I am sure that citizens will see that these cars meet high standards, and the price is more acceptable compared to imported cars," said Aliyev.

This appeal is especially relevant considering the launch of the second local automobile brand. The opening ceremony and assembly of the first Khazar car took place at the joint Azerbaijani-Iranian business forum held on March 29, 2018 in the presence of Azerbaijani and Iranian presidents Ilham Aliyev and Hassan Rouhani. The plant was constructed entirely on private capital. At the first stage, the amount of investments reached to $15m (75% by Azerbaijani OJSC Azərmaş and 25% by Iranian company Iran Khodro).

Khazar standards

Azerbaijani government has also contributed to the establishment of the Khazar plant by providing 10 hectares of land area and creating necessary infrastructure. In general, preferences from Azerbaijani government at the stage of construction and delivery of equipment allowed to save $5m.

According to Emin Akhundov, Chairman of the Board of Azərmaş, for the first time Azerbaijan will have a conveyor for the production of cars, and not just assembly production. The main difference between the new Khazar plant and similar enterprises will be the production of spare parts locally.

Currently, the number one priority is to ensure the so-called pipeline manufacture of five cars per hour. "We should make sure that we can assemble one car every 12 minutes, not a minute later or earlier for the stable operation of the plant," said Akhundov.

According to Akhundov, the results of marketing research allow to produce cars in three different categories - economy, business and premium classes. Within the next six years, the throughput capacity of the plant will enable the manufacture of 10,000 economy-class cars with engine capacities ranging from 1.4 to 1.8 litres. The Khazar cars comply with the Euro-5 standards, which will help them find their customers in Azerbaijan, and also replace the old cars.

Meanwhile, it is planned to export 20% of the cars produced in 2018 to the countries of CIS, Middle East, and Africa. The management is considering the production of Runna, Samand, Soren, Dena, Peugeot-206, Peugeot-207, Renault-Tondar, Renault-Pickup models in the future. Marketing researches showed that it would have been much more difficult to find buyers in more expensive segments both in the local market and beyond Azerbaijan.

According to the director of the plant, they have also considered the production of electric vehicles but since their cost was much higher than cars with internal combustion engines, the management opted for the production of economy-class cars.

The first product of the Azerbaijani-Iranian plant will be a Khazar car with a manual transmission and engine capacity of 1.7 liters. As E. Akhundov noted, its price will be slightly lower than other cars of this class, around ₼14,000-16,000. At the same time, the model range is adapted for the roads of the CIS, the Middle East and Africa thanks to higher vehicle clearance.

Meanwhile, experts believe that Azerbaijan should continue the implementation of projects in the automotive industry, and now it is important to support the initiatives of local entrepreneurs to further develop the automotive industry in the country. In particular, negotiations on the production of light trucks in the newly established Hajigabul industrial district (HID) are at the final stage.

The development of automobile industry can promote the development of related industries such as metallurgy and chemical industry in Azerbaijan. Therefore, it is very important to organise a competent advertising campaign for local automakers, to popularise them in the local market and abroad through participation in various exhibitions. On the other hand, experts also suggest the development of preferential loaning programs for those who wish to purchase these car brands, which can also contribute to the growth of interest in these brands.