TURKMENISTAN: LAND OF USED CARS

UNCLAS SECTION 01 OF 02 ASHGABAT 000932

SENSITIVE

SIPDIS

STATE FOR SCA/CEN; EEB

E.O. 12958: N/A
TAGS: ECON ETRD PGOV TX
SUBJECT: TURKMENISTAN: LAND OF USED CARS


1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: The passenger car market in Turkmenistan
has rapidly expanded over the past seven years. Most of the
cars that have been imported to Turkmenistan during that
period were U.S., Japanese, and German models. More than 90%
of imported cars are used and many were involved in accidents
prior to arriving in Turkmenistan. Most autos are imported by
local independent entrepreneurs rather than by official
dealers or distributors. END SUMMARY.


3. (SBU) Turkmenistan's car market underwent a revolution in
2002 when local entrepreneurs started importing large numbers
of used, cheap, high-quality, right-hand-drive Japanese cars
(mostly Toyotas) from the UAE. That inflow of Japanese cars
completely stopped imports of new Russian cars that had
previously dominated the Turkmen market. Citing safety
reasons, the Turkmen Government gradually phased out imports
of right-hand-drive cars. First the government imposed a ban
on driving such cars, which forced the owners and importers of
such cars to convert them to left-hand drive to get around the
ban. To put an end to this issue, the government finally
prohibited imports of all car models that were initially
manufactured as right-hand drive. The right-hand drive ban
forced Turkmen car traders to switch to importing U.S.,
Canadian, and German-made cars from the UAE.


4. (SBU) Currently, U.S. and Canadian-made used Japanese
brands dominate the market, with Toyota being the most popular
brand. The UAE remains one of the principal markets from
which Turkmen import cars to Turkmenistan. Auto markets
located in the cities of Sharjah Al Awir, and Ajman, which
offer used cars with body defects ranging from insignificant
dents to completely crushed cars, are especially popular among
Turkmen importers. Defective cars are cheaper than undamaged
cars and it is more cost-efficient to fix a damaged car in
Turkmenistan rather than to purchase an undamaged car. A
whole "industry sector" specializing in repair of damaged
imported cars has developed in Mary city, which has also
become the hub of Turkmenistan's used car business, where
people from around the country come to purchase cars. The
city's Customs checkpoint has turned into a huge parking lot
for car transporter trucks loaded with unattractive-looking,
damaged U.S. and Canadian-made Toyotas, Nissans, and Hondas.
The same cars have an absolutely different look when they make
their way to sales lots after having passed through bodywork
shops. Every parking lot in Mary is packed with newly-fixed
shiny cars with dollar prices on their windshields.


5. (SBU) All trade is done in cash. Payments are made
immediately or in a number of installments, which is more
expensive. As a rule, traders inform customers about the
damage that was repaired on the particular car.


6. (SBU) A limited number of local entrepreneurs purchase
used cars directly from the U.S. using online auctions. This
more cost-efficient method, which eliminates UAE traders from
the process, has not yet undermined the position of car
traders who import cars from the UAE. According to a local
car trader, most of them still prefer to purchase cars in the
UAE because it is easier to purchase a good car when you can
physically check the car that you are buying. Another reason
is that it takes a much shorter time (about ten days) to bring a
car from the UAE rather than from the U.S. (about 45-50 days),
thus making the turnover faster. Some car traders specialize
in bringing used German-made cars (mostly BMWs and Opels)
directly from Germany or from Lithuania, but the number of
cars coming directly from Europe is relatively small.


7. (SBU) The prices for used cars in Turkmenistan are
significantly higher than those in the United States due to

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high transportation costs and customs duties. It costs from
$2,200 to $2,700 to transport a car from the United States
depending on whether it comes directly from the U.S. or
through UAE traders. The customs duty for a car in
Turkmenistan is 30 cents for every cubic centimeter of the
engine volume plus 5.2% of the price the car was purchased for
in the UAE or United States. These factors bring the price of, for

example, a 2004 Toyota Camry to approximately $12,000 in
Turkmenistan.


8. (SBU) There are official dealers and distributors of
various brands that offer new cars for sale in Turkmenistan.
The high prices (a basic Toyota Corolla costs around $18,000,
Toyota Camry $25,000) make new cars unaffordable for most of
the population. As a result, new cars are usually purchased
by state agencies in limited numbers.


9. (SBU) COMMENT: The car market in Turkmenistan is likely
to remain dominated by used cars because of the relatively
low average income in the country -- something which is unlikely to
change
any time soon. Imports of U.S.-made used cars (mostly
Toyotas) will prevail in the short-term with no serious
competition. Private car traders will retain their
advantage over official dealers and distributors thanks to
their flexibility and ability to turn over their money faster.
END COMMENT.

CURRAN