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Home»Finance»China’s Electric Vehicle Expansion in Central Asia
Finance

China’s Electric Vehicle Expansion in Central Asia

December 23, 2023No Comments7 Mins Read
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China produced almost 60 percent of the world’s electric vehicles (EVs) in 2022. In Central Asia, the market for EVs is small but growing, and Chinese companies are especially dominant. While imports from China accounted for only 3 percent of Europe’s EV sales in 2022, over 90 percent of EVs sold in Uzbekistan that year came from China. In Uzbekistan, brands like BYD are shifting perceptions of “Made in China” products.

Chinese brands also dominate EV imports to Kyrgyzstan, but unlike in Uzbekistan, where local demand is driving sales, few EVs from China can be seen on the streets of Bishkek or Osh. Instead, Kyrgyzstan serves as a convenient base for re-export to Russia.

From January to August 2023, Kyrgyzstan imported 4,085 EVs from China — almost six times more than the same period last year. Bishkek consistently ranks as one of the most polluted cities in the world, and Kyrgyzstan is trying to tackle pollution by encouraging the use of EVs through preferences such as a zero import tax rate.

Given Kyrgyzstan’s geographical distance from Europe and ongoing sanctions against Russia, China is a major supplier of vehicles. Although Chinese cars were associated with low quality just three to five years ago, today their popularity is rapidly gaining momentum.

However, the current state of electric charging station infrastructure in Kyrgyzstan leaves much to be desired. There are only about 30 charging points across the country, most of which are located in the capital, Bishkek. Bureaucratic hurdles also hinder the rollout of charging infrastructure, with approximately 195 days needed to obtain the necessary permits. 

The shortage of service points for EVs significantly hinders the development of demand among the population. One Kyrgyz owner of a Chinese EV who we spoke to, Adilet, said that he decided to purchase his EV only because he owns a private house, which allows him to charge the car.

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Most of the growing number of Chinese EV imports into Kyrgyzstan are re-exported to Russia. One importer of Chinese automobiles in Kyrgyzstan, speaking on condition of anonymity, shared that the demand for EVs within Kyrgyzstan is still low. His business primarily focuses on re-export to Russia, where purchasing power is higher, and there are fewer issues with energy supplies. 

According to the importer, Chinese EV manufacturers have several significant advantages compared to Western ones: Geographical proximity and the “absence of restrictive conditions” due to sanctions; rock-bottom prices due to “the dumping of Chinese manufacturers;” and most importantly, Chinese companies are “ready to declare an official price in documents that is much lower than the actual price.”

Kyrgyzstan has become an attractive country for re-export due to the absence of indirect taxes. A Kyrgyz importer emphasized, “We don’t have excise taxes. No fees for recycling. So it’s cheaper to import through us. Secondly, our value-added tax is 12 percent – in Russia they pay 19-20 percent for a car.”

At this stage, the growth in the import of Chinese cars in Kyrgyzstan mainly benefits businesspeople and smugglers eyeing re-export to Russia. Efforts by authorities to encourage the population to switch to EVs appear to be largely unsuccessful, given that the infrastructure and economic incentives for demand are not yet well established. 

Since 2019, Kyrgyzstan has been trying to encourage Chinese EV companies to build manufacturing plants in Kyrgyzstan. If plans to open an assembly plant for Chinese EVs do move from the realm of announcements to practical implementation, opportunities will emerge. However, the government must still address the primary hurdle to a burgeoning EV market: the energy deficit, which is estimated at 3.2 billion kilowatt-hours this year.

Uzbekistan’s government has also introduced a number of benefits to encourage the adoption of EVs, and on the face of it, these measures are yielding greater results. From January 1, 2019, a zero customs and excise tax rate has applied to the import of EVs, and in September 2021, Uzbek President Shavkat Mirziyoyev exempted EVs from road transportation fees. 

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When these import exemptions for EVs first became effective in 2019, only 20 units were imported, and up until 2021, the number of imported EVs totalled only 200. However, from 2021 onward, the situation began to change dramatically. In 2021, the value of imported EVs reached $16.9 million – six times higher than in 2020. Almost 90 percent of these EVs came from China. In 2022, Uzbekistan imported 2,180 EVs worth $69.8 million, with 92 percent coming from China.

The explosion in EV imports coincided with the roll-out of charging infrastructure. Prior to 2020, EVs lacked adequate infrastructure: The first powering station in Tashkent was installed by Uzbekistani company Makro only in October 2020.

By early 2022, 36 charging stations had been established across the country, most of them built by private sector companies Makro, TokBor, and Megawatt Motors. In December 2022, Mirziyoyev signed an ambitious decree to increase the number of electric charging stations to 2,500 by the end of 2024. 

Despite having only 66 operational stations at the time of the decree, the government hopes to achieve their goal through incentivizing and mandating stations. Earlier this year, businesses gained the right to sell electricity at independently set prices and on January 1, 2024, new shopping malls, hotels, gas stations, business centers, and infrastructure facilities along highways will be required to install electric charging stations.

Chinese companies are also moving EV manufacturing to Uzbekistan. On September 26, Chinese automaker BYD, agreed with Uzavtosanoat to establish a factory in Uzbekistan. Uzbekistan has made plans to establish its own production of EVs in the past, but many of these plans have not yet materialized. 

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BYD may be different as it already has a strong customer base in Uzbekistan. Although many Uzbek consumers are still skeptical of Chinese products, which are associated with low prices and cheap quality, brands such as BYD may be shifting these perceptions.

Olesya, 21, who bought a BYD Song Plus Flagship in January 2023, describes her BYD car as meeting the standards of luxury cars. She stresses that the purchase of an EV is becoming more relevant against the background of problems with high-quality gasoline in Uzbekistan.

Shokhrukh, 43, claims that thanks to the purchase of an EV, his monthly expenses have decreased by 30 times — from $300 to $10. Another BYD owner, Olimkh, 24, also justifies his purchase in terms of savings on gasoline, and says that in terms of comfort, quality, design, and layout, the Chinese EV is ahead of local competitors.

But despite government support and all sorts of incentives, the development of the EV market in Uzbekistan may still be threatened by the same high prices in the energy sector suffered by Kyrgyzstan. According to the Ministry of Energy, electricity subsidies cost the budget $1 billion annually, and Uzbekistan’s national electricity company is the country’s most unprofitable state-owned company. 

Although growing imports of Chinese EVs in Uzbekistan appear to be based on genuine consumer demand, the development of the electric transport sector still appears to hinge on reform of the energy sector. 

This article was produced as part of the Spheres of Influence Uncovered project, implemented by n-ost, BIRN, Anhor, and JAM News, with financial support from the German Federal Ministry for Economic Cooperation and Development (BMZ).
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