Central Asia’s wealthiest country is expanding its automobile industry by stepping up local production of the South Korean automobile brand Kia, which is owned by Kia Motors.
Kazakhstan’s largest vehicle manufacturer and distributor, Saryarka AvtoProm, launched production operations for Kia vehicles this week to reduce the country’s dependence on imports. Speaking at a launch ceremony at a plant in Kostanay, Prime Minister Askar Mamin said that Kazakhstan’s automotive industry “shows positive dynamics every year.”
The plant in Kostanay will manufacture 20,000 vehicles per year, including Kia’s Rio subcompact, Picanto city car, Cerato compact car, and mid-size Optima. In addition, Seltos and Soul subcompact crossovers, Sportage compact SUV, and Sorento mid-size crossover will roll off assembly lines in 2021. Starting from 2022, Kazakhstan will be manufacturing Kia Stinger, Kia Carnival, and Kia K900. Production will be carried out in accordance with standards developed by Kia Motors.
The production localization level at the factory in Kostanay will be increased up to 50 percent thanks to the completely knocked down method (CKD). CKD means that vehicles will be assembled using individual parts and sub-assemblies manufactured outside the country, with some technological operations, such as welding, painting, interior decoration performed in Kazakhstan.
The project is being implemented within industrial cooperation with Kia Motors. As of today, Kia produces more than 1.4 million vehicles annually at 14 manufacturing and assembly operations in eight countries.
“The CIS countries market plays a significant role in our development, and Kazakhstan is one of the most priority regions for further growth,” said Jin-Ha Kim, President of Kia Motors Russia and CIS LLC, according to a report by Kapital.kz.
South Korean manufacturers are convinced that Kia’s models produced in Kazakhstan will become the most affordable vehicles on the local market. All models will be reportedly covered with a 5-year manufacturer’s car warranty, the first of its kind in Kazakhstan.
In 2020, Saryarka AvtoProm obtained a 30 billion tenge ($70.8 million) credit line from Kazakhstan’s Eurasian Bank. The bank’s offer covers a three-year period and aimed to help the country’s largest vehicle manufacturer and distributor purchase car kits from Chevrolet and Kia.
“The demand for locally manufactured cars is constantly growing. Of the three cars bought on credit, two were produced in Kazakhstan. The bank’s financing of the production of domestic cars will make them even more accessible for Kazakhstanis,” said Valentin Morozov, CEO of Eurasian Bank.
With a population of almost 19 million, Kazakhstan’s economy is largely dependent upon oil and natural gas production. Its nascent auto industry forms only a fraction of the national economy. Meanwhile, despite the coronavirus outbreak and its challenges, Kazakhstan’s automotive industry showed significant growth in production and sales in 2020.
In 2020, automotive manufacturing represented 33.4 percent of the country’s machinery industry, with over 77,000 vehicles produced. In 2019, Kazakhstan produced slightly more than 50,000 vehicles accounting for 26.3 percent of the machinery industry. Meanwhile, the plant in Kostanay accounted for more than half of all vehicles produced in 2020.
In 2020, Kazakhstan exported more than 10 percent of all manufactured vehicles or 8,122 units to the neighboring countries, with nearly 55.9 billion tenge ($132.3 million) in revenue.