"80 percent of the cars assembled in Azerbaijan were purchased by the state"

Azerbaijan is considering draft amendments to its tax code that could exempt cars manufactured in the country from Value Added Tax (VAT) for a period of 10 years. The proposed changes were recently discussed at a meeting of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, and they have been recommended for the parliament's plenary session. If approved, the exemption would go into effect from May 2023 and apply to the sale of domestically produced passenger cars.

The move aims to support the local production of passenger vehicles within Azerbaijan. The country currently has automobile plants located in Neftchala, Nakhchivan, Ganja, and Hajigabul. Notably, on May 1, the foundation for a joint automobile production plant between Azerbaijan and Uzbekistan was laid in Hajigabul Industrial District, which will focus on paint, welding, and assembly stages.

According to the State Statistics Committee, Azerbaijan produced 1,259 passenger cars between January and April 2023. This represents a 77.3 percent increase compared to the same period in 2022. Additionally, as of May 1 this year, there were 877 domestically produced cars in warehouses. In 2022, a total of 2,119 cars of domestic production were sold in Azerbaijan, as reported by official sources.

Aydin Huseynov, a member of the Milli Majlis Committee on Economic Policy, Industry, and Entrepreneurship, believes that the VAT exemption for domestically produced cars will have a positive impact on production. He told the Turan news agency that this will increase the production of cars in the country and create new jobs, thereby increasing the wages of people employed in the industry. Huseynov also highlights that there is already significant interest in cars within Azerbaijan, given the presence of over 1 million cars in the country. He anticipates that the policy change will encourage citizens to prefer domestically produced cars, ultimately benefiting the economy.

However, economist Natig Jafarli expressed a different point of view to Radio Azadlig, stating that Azerbaijan is not producing cars, but rather assembling them. He suggests that, based on international standards, only a few factories in Azerbaijan use a significant portion (around 40-45 percent) of local components in their assembly process.

Jafarli argues that this situation only creates limited opportunities for job creation in the automotive sector. To establish car production in Azerbaijan, he believes that attracting large investors to the country and encouraging well-known brands to set up manufacturing facilities are necessary steps.

Jafarli notes that currently, the state is the primary buyer of the cars assembled in Azerbaijan, with around 80 percent of them being purchased by government agencies. He emphasizes that the population's lack of interest in domestic cars stems from concerns about quality and relatively high prices, which often make used cars of better quality a more attractive option.