PSA Peugeot Citroen recently inked a partnership with Agromash Holding, for the assembly and distribution of the French automaker's passenger cars and LCVs in Kazakhstan. Simon Warburton was in contact with the trailer and agricultural machinery manufacturer based in the huge country on Russia's southern border.

The deal between PSA and Agromash will see assembly start in June this year, with a range of models, namely the 301, 3008, 508 and Partner vehicles. Production capacity will reach 4,000 units per year in the beginning, with a possible total of around 10,000 models envisaged.

The project is expected to provide employment for more than 300 people in France and 150 in Kazakhstan and, along with locally-assembled models, Peugeot will provide the Kazakh market with the Peugeot 408 manufactured on the full-cycle Russian plant of PSA in Kaluga.

j-a: How large is the Kazakh market currently?

AM: [The] Car market of Kazakhstan has a big potential. As of January 2013, 3,580,756 vehicles were registered in the country, 2,895,297 of which are over ten years old, that is, 81% of the whole vehicle fleet of the country are old vehicles that need to be renovated gradually.

In 2012 the new car market of Kazakhstan doubled as compared to 2011.

j-a: To what extent is credit avaialble for Kazakh customers to purchase vehicles?

AM: Banks have been offering a variety of loan programmes for customers recently. According to analysis of second-tier banks held by the National Bank of the Republic of Kazakhstan, 56% of the banks are forecasting a growth of demand for consumer products in Q1, 2013.

j-a: Where are you looking to sell the partnership's vehicles and how did you arrive at the final decision concerning where to base the manufacturing plant in Kazakhstan?

AM: [We] speak of the globalisation strategy and expansion of the business outside Europe. One of our goals is to reach 50% sales outside Europe in 2015. However, we mostly stake on three macroregions: Russia and the CIS countries, Asia and China and Latin America.

PSA Peugeot Citroën was considering several sites for vehicle production in the territory of Kazakhstan, including a plant in Kostanay. The European automotive corporation was studying terms quite thoroughly and [for] a long while. The negotiations lasted for over a year.

French and Moscow experts, including analysts and financiers, were studying both the Kazakhstan market and prospective partners at different angles in order to provide an optimal range of Peugeot products to be launched.

Based on detailed study and negotiations, the parties made a strategic decision to start-up Peugeot vehicles production at [the] Agromash Holding plant. Peugeot agreed to accept a set of terms offered by AllurGroup and Agromash Holding that would make the project successful in the territory of Kazakhstan.

Peugeot automobiles had already officially been presented prior to 2010. And over 2,500 units were sold.

j-a: What influences a Kazakh customer when purchasing a vehicle?

AM: It is noteworthy that car sales depend on a number of factors, including aftersales service, availability of spare parts and advanced dealer network. Much depends on an official dealer, its equipped auto centre where the cars and service are presented and where only professionals selling and servicing them must work. Successful sales are a combination of quite significant factors and monitoring of consumer demand.

For instance, recent market trends show the motor car segment makes over 70% of all vehicles sold. C class, in its turn, is the leader in the motor car segment with strong representatives like ZAZ Chance, UZ-Daewoo Nexia and the Chevrolet Cruze. Distinctive features of the class...are light engine capacity, small vehicle size and easy maintenance.

The most popular C class sedan - model 301 - will cost from KZT2,445,000 (US$16,212).

As for aftersales service and dealer network, AllurGroup has a ten-year experience in the official car market of the country, and since 2010 is also a car maker in the territory of the Republic of Kazakhstan.

J-a: How many cars are you looking to sell initially?

AM: We are planning to sell about 1,000 vehicles in 2013. If the market size reaches 120,000 - as estimated by AKAB [Kazakhstan Autobusiness Association] - Peugeot sales will make 0.8% - taking into account semi-annual sales. From then on, we expect to take at least 2.4% of the market.

j-a: When will you start work and how many staff will be needed?

AM: Industrial launch is expected in June, 2013 - commercial - in July, 2013.
Over 300 new workplaces will be created in France and 150 workplaces in Kazakhstan within the project.

What are some key peculiarities of the Kazakhstan market?

AM: In July 2011, there was a prohibition on import of second-hand cars, 180,000 units of which were sold in 2010. Since then the new car market doubled and reached 97,000 units in 2012 - market growth prospects for 2017 are 230,000 units. Major segments are B, C and SUV.

Five distributor companies occupy dominant positions in the market. BIPEK AUTO with Chevrolet, Skoda, Kia, Lada, UAZ, KAMAZ, Astana Motors featuring Toyota, Nissan, Subaru, Hyundai, BMW, Lexus, Hyundai Truck and Bus and Mini, as well as Virazh - LADA, GAZ, UAZ, MAZ, ZIL, KAMAZ PAZ, LIAZ, Daewoo Bus, Foton and FAW.

[There is also] Mercur Auto with Audi, Volkswagen, Porsche and Mitsubishi - as well as Allur Auto - Sangyong, Iveco, Zaz, Mitsubishi and Suzuki.

j-a: Who is politically responsible for the automobile sector in Kazakhstan?

AM: Car industry development in Kazakhstan is one of the directions of the State Programme for Industrial and Innovation Development of the Republic of Kazakhstan for 2010 - 2014. It is a vast merit [attribute] of global car brands' representatives in Kazakhstan, including dealers, distributors and manufacturers, that more and more global automobile companies consider Kazakhstan as an attractive market with big potential and the possibility of mutually profitable partnership.

j-a: How will the deliveries from Peugeot be sourced?

AM: Components will be imported from European Peugeot plants: 301 and Partner  - Vigo Spain; 3008 - Sochaux France; 508 - Rennes France and the 408 CBU - Kaluga.