Toyota Investment Confirms Long-Term Potential

Japanese Toyota Motor has announced it is to begin production of its Fortuna SUV in Kazakhstan from late 2014. Following investments totalling some US$35mn, local plants will begin painting, welding and assembling completely knocked-down versions of the vehicle. BMI believes the country is well-positioned to continue attract ing investment from auto manufacturers; domestic sales are robust, and the country is a viable location for production for export. Further, continuing improvements in the business environment and investments across the supply chain should beget further growth. We maintain a bullish outlook over the long term.

Target Markets

Production, which will start at around 3,000 units annually and may rise in the future, will be for both the domestic and export markets.

BMI maintains a bullish outlook on private consumption growth in the country, and retail trade remains fairly robust ( see our online service, October 26 2012, ' Stronger Growth In 2013 ' ). This has partly informed our bullish passenger car sales outlook, and should be a strong driver of growth for Toyota sales in the country.

Kazakhstan is part of a Customs Union with Russia and Belarus, and is geographically well-positioned for exports to the Central Asia region. This should facilitate robust export volumes for the company.

Investment Outlook

A number of auto manufacturers have invested in the country recently. Following investment of US$400mn, Russian auto manufacturer AvtoVAZ will establish a joint venture (JV) with Kazakhstan companies AziaAvto and SEC in Ust-Kamenogorsk. Under the agreement, vehicle production of 60,000 units per year will start in 2015. There are plans to increase annual capacity to 120,000 vehicles at a later stage. The target markets are Kazakhstan, Siberia and the Far Eastern Federal Districts of Russia, Central Asia and the Transcaucasia.

BMI believes that industrial production in the country dipped slightly in 2012, although we believe that there will be an increase in 2013. Further, there have been some improvements in the business environment in recent years, but we caution that this must continue if the country is to see an increase in investment.

We have long maintained that, if the current production projects are successful and the business environment continues to improve, we may see further investment in export-orientated production - a view borne out by Toyota's move .

This article is tagged to:
Sector: Autos
Geography: Kazakhstan

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