Tashkent, Uzbekistan (UzDaily.com) -- S&P Global Ratings said that UzAuto Motors JSC (UAM) faces only a limited threat to its competitive position from the recently announced reduction in Uzbekistan’s custom duties on imported new cars. 

The cut to 15% from 30% will improve the affordability of imported cars in Uzbekistan. However, UAM’s (B+/Stable/B) pricing for its key models remains 20%-40% lower than comparable import vehicles, amid broad localization and cost optimization following the General Motors Global Emerging Markets (GEM) platform launch. 

“Therefore, we forecast limited pressure on its near-term pricing, sales, and competitive position. That said, UAM’s pricing advantage could diminish if we see further broad-based reductions in import taxes and levies in the medium term. The government of Uzbekistan also revised the minimum prepayment requirement for new car orders to 50% from 85%. We see little downside risk to our credit metrics from this move, since it is already captured in our base-case working capital outflow of $200 million-$250 million in 2022,” the agency said.

Uzbekistan’s gradual liberalization of the auto industry does not change our assessment of UAM’s relationship with the government. This is because we believe the industry is a key pillar in helping diversify the economy away from natural resources, and UAM remains a pivotal asset with its GEM platform project realization.