China has carved out a dominating role in Central Asia’s electronic vehicle market. Now, Beijing is looking to replicate its success in the Caucasus. Azerbaijan is emerging as Beijing’s point of entry for the region.
During the first 10 months of 2024, Azerbaijan imported 2,592 electric vehicles, with Chinese-manufactured models accounting for a 77 percent share. The trend toward electrification is clear: last year, Azerbaijan imported 15,471 hybrid and electric vehicles from China valued at $396 million, a vast increase over the 4,636 vehicles worth $154 million delivered in 2023. The growing presence of EVs is not limited to passenger vehicles: Baku has also imported electric buses from Chinese manufacturers Yutong and BYD.
The rise in exports to Azerbaijan is a reflection of China’s increasing dominance in the global EV market; Chinese models now command a staggering 76 percent share of worldwide EV and plug-in hybrid sales, thanks to aggressive expansion into new markets.
In Azerbaijan, favorable policies have encouraged EV adoption. Since 2019, imported electric vehicles have been exempt from value-added tax, and since 2022, customs duties on batteries and charging equipment imports have been eliminated. These policies have encouraged consumers to shift their focus from conventional cars to Chinese electric vehicles.
The pace of Azerbaijan’s importation of Chinese EVs is ready to accelerate. Last July, Electrify Azerbaijan LLC, a subsidiary of Baku-based SARDA Group, signed an agreement with China’s BYD covering the purchase of electric buses and the establishment of electric bus production in Azerbaijan. Under the agreement, 160 electric buses equipped with BYD motors were brought to Azerbaijan to launch a pilot program, with some buses in operation during last November’s COP29 environmental conference.
The BYD deal involves an overall investment of $60 million, with an initial $17.1 million used to establish a joint venture for electric bus production at the Sumgayit Chemical Industrial Park, creating 600 jobs. BYD is also expected to begin local production of spare parts in Azerbaijan this year, with locally made components projected to cover 40 percent of the total bus-assembly costs by 2030. Ultimately, the company plans to increase annual production capacity at the Sumgayit facility to 500 buses.
On the sidelines of COP29, another Chinese electric vehicle manufacturer, Nio, made a deal with Azerbaijan-based Green Car LLC. Under that agreement, Green Car will serve as Nio’s distributor in Azerbaijan, and the Chinese automaker is expected to start delivering vehicles during the second quarter of 2025.
China is counting on Azerbaijan to serve as a beachhead, enabling the expansion of Chinese-made EV sales in neighboring markets across the region. For Azerbaijan, the growing presence of China’s EVs offers multiple benefits, helping to diminish its carbon footprint and meet its target for the reduction of harmful emissions. EVs also fit nicely into the government’s plans to ramp up renewable-energy power generation.
Economically, Chinese EVs are more affordable for Azerbaijani consumers than competing Western-made models. In addition, it is approximately five times cheaper for an EV to operate than a gasoline-powered vehicle. Reductions in domestic demand, in turn, can potentially help Azerbaijan export additional volumes of energy.
The growing partnership with China in the EV sector entails risk for Baku. Primarily, the increasing importation of Chinese EVs could leave China with a stranglehold on the Azerbaijani market that could be potentially leveraged in a variety of ways to Azerbaijan’s disadvantage, as well as create a trade-deficit trap. Some industry observers point out there is a chance that Azerbaijan may end up serving as an assembly and distribution hub without significantly developing high-value-added manufacturing capabilities of its own, producing advanced battery systems and other electronic components.
To guard against this possibility, Azerbaijan needs to press China at this comparatively early stage to expand the localization of production for EV components and secure partial technology transfers. Officials in Baku also should establish local research centers to facilitate knowledge sharing and building local capacity. Most of all, Azerbaijan should promote the diversification of its EV market. Cultivating bilateral relationships with different EV producers in Europe and South Korea could reduce the risk of dependence on China and establish more balanced EV market conditions in the long term.
By Yunis Sharifli via Eurasianet.org
