UZBEKISTAN’S AUTO INDUSTRY FACES PROBLEMS AT HOME AND ABROAD.
Publication: Monitor Volume: 6 Issue: 229
Uzbekistan is the only country in Central Asia and the Caucasus in which engineering branches make an important contribution to industrial output. Thanks to its Uz-Daewoo joint venture with Korea’s Daewoo conglomerate, the Uzbekistan government has often regarded automobile production as the jewel in its manufacturing crown. Unfortunately, Daewoo Motor Company’s ongoing bankruptcy could bring production at Uz-Daewoo to a halt in the coming months. Because the parent company in Korea provides Uz-Daewoo with most of its components, the Tashkent plant is facing the prospect of a total shutdown if Daewoo Motor’s accounts remain frozen for much longer. In addition, Daewoo Motor’s bankruptcy is likely to delay the Tashkent plant’s launch of the Matiz model, which had been scheduled for mid-2001 (Interfax Central Asia & Caucasus Business Report, November 12).
Not all of Uz-Daewoo’s problems bear the “made in Korea” label, however. Like all export-oriented manufacturers in Uzbekistan, Uz-Daewoo faces problems caused by Uzbekistan’s highly controlled and distorted foreign exchange regime. The government this summer unified the official and commercial bank exchange rates, thereby allowing the official exchange rate to depreciate significantly. However, the official exchange rate is still heavily overvalued. The official central bank rate was at 312 soms to the dollar as of late November, while the black-market rate was near 800 per dollar. Like other companies in Uzbekistan, Uz-Daewoo is not permitted to purchase as much foreign exchange as it wants, and profit repatriation is limited by administrative restrictions.
Despite these problems, Uz-Daewoo’s Nexia remains the most popular imported car on the Russian market. Currently priced between US$5,750 and US$7,835, the Nexia can still compete on price with locally produced cars in Russia because imports from Uzbekistan face relatively low tariffs. However, as the Russian ruble has depreciated while the Uzbek som remains overvalued, Russian-made imports have become much more competitive in Uzbekistan. This has hurt Uz-Daewoo in its home market, as domestic car sales have dropped sharply this year. Uz-Daewoo car production dropped 53 percent during the first three quarters of 2000, even as inventories of unsold cars have risen steeply. Uz-Daewoo’s production of light commercial vehicles has also fallen: output of the Damas microvan dropped 49 percent in the first three quarters of 2000, even as Damas stocks have been increasing (PlanEcon East European Automotive Monitor, December 2000).
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