The out of date automotive sector
Economy05 November 2019, 13:29 596
According to experts, there should be customs incentives and lower interest rates on loans
Azerbaijani Minister of Ecology and Natural Resources Mukhtar Babayev held a press conference on October 31. Speaking on the activities of the Ministry, the minister said that reducing global environmental problems is a priority. He noted that the major causes of air pollution are large enterprises and the transport sector. According to Babayev, measures are being taken to prevent air pollution. Thus, in order to neutralize the emissions, treatment facilities are installed in about 500 large public catering enterprises in major cities of the country. The minister stressed that from more than 1 million 402,000 vehicles, 35% have been in operation for about 10 years, 23% for more than 20 years, and 19.1% for more than 30 years. Car imports increased 5 times in 2018, compared to 2016, he added. Babayev said he believes that to reduce the harmful effects of the transport sector on the atmosphere, it would be effective to renew the country's vehicle fleet, apply various tax and customs benefits and subsidies that encourage the use of eco-friendly vehicles. He noted that the Ministry of Economy is developing a vehicle recycling program that aims at improving the country’s environmental situation, stimulating local automobile production, as well as decommissioning vehicles unsuitable in terms of ecology and technical safety.
What steps should be taken to reduce the environmental impact of transport, to upgrade the vehicle fleet, and to increase the number of eco-friendly vehicles?
Auto market expert Eldeniz Jafarov said there is no infrastructure for electric cars in the country. "First of all, the customs duties on eco-friendly vehicles should be reduced and the excise tax imposed on engine capacity should be eliminated. Earlier this year, some duties on electric vehicles were eliminated. Currently, the duty is 15%. This is commendable. However, this does not change the situation much as there is no infrastructure for cars with electric motors in our country. Hybrids are also considered as eco-friendly vehicles. People prefer hybrid automobiles. For this reason, we expect the customs duties and excise tax on these automobiles to be reduced soon. Another type of incentive could be a simplification of auto loans when buying a new car, reducing the interest rate and the annual interest rate required. At present banks offer 40% of the cost of the car and 16% annually. This is a high figure. If the initial payment is 20% and 9-10% per annum, it would be affordable for citizens. Then everyone would buy a new car, and old cars would get out of circulation,” the expert noted.
Auto expert Eyyub Aliyev said that the banking sector could also be involved in this, requiring a cheaper initial payment and providing loans with interest. "Firstly, car owners who have been using cars for more than 30 years should be listed. Utilization should first start with these car owners. They should be given some credit privileges to replace their old, environmentally hazardous cars. For example, if there was a contract between the automobile manufacturing company, "Khazar", and the government, the sale of discounted cars, and the renewal of old cars could be carried out. It is not necessary for everyone to drive a hybrid or electric car today because they are not cheap cars. But it would be better for everyone to have a new one. There are some newer models that are more eco-friendly than the old ones and are more advisable to drive. It is also possible to involve the banking sector in this to provide cheaper initial payment and loans with interest. Or buy old cars from citizens and lend a new one at a low-interest rate without requiring initial payment. Currently, houses are sold under certain incentives in our country, and in fact, these incentives could be applied to the auto market for citizens to upgrade their old cars,” he said.
According to transport expert Hussein Abdullayev, a vehicle inspection is a solution. "First of all, vehicle inspection should be carried out effectively for vehicle utilization. During vehicle inspection, car owners are told how hazardous their car is for the environment. As a general rule, when passing a vehicle through inspection, it should be made clear if the vehicle is not up to standards. They should even deregister cars that do not meet certain criteria. True, this is a bit of a challenge because it can cause frustration for people, especially in rural areas, who earn a living by the means of these old vehicles. Because no matter how much they are discounted, they cannot afford a new car,” he said.
According to the expert, the solution to these problems does not end with customs duty incentives. "Some customs incentives need to be made to encourage the use of eco-friendly vehicles. The import of electric cars is not cheap. That is, the government has not yet taken any stimulating action in this area. We can take Norway as an example. There are no customs duties on these cars; free parking and charging places are offered in the city. Therefore, most of the cars there are electric cars. Let's say we reduce the customs duty, but things are not going to be effective unless the city has places to charge those cars. Therefore, comprehensive, well-thought-out stimulating steps should be taken,” he added.
First in CIS, second on global scale – Azerbaijan has leading positions in terms of access to electricity