Tashkent, Uzbekistan (UzDaily.com) —  In the first half of 2024, Uzbekistan saw a slowdown in vehicle price growth, according to a report on financial stability from the Central Bank.

According to the Central Bank, the gap between market prices and fundamental prices of vehicles continued to narrow, decreasing by 44% since the beginning of the year.

The market price represents the current cost of a vehicle as influenced by demand, supply, and other temporary factors. In contrast, the fundamental price is a more stable and long-term valuation of a vehicle based on its intrinsic value.

An increase in car market supply was driven by a 10% growth in domestic car production compared to the same period in 2023, along with a significant rise in imports. This led to a reduction in car prices and a shrinking gap between market and fundamental values amid rising household incomes, as noted by the Central Bank.

A decrease in purchasing power has impacted demand in the car market. In the first half of the year, the average interest rate on car loans rose by 3.8 percentage points from the same period last year, and the average car loan amount per borrower increased by 6.1%. Higher car loan rates and slightly reduced loan terms have restricted access to credit-based car purchases.

A reduction in car loans contributed to the slower pace of vehicle price increases. Banks have tightened lending conditions for car purchases: the average loan term decreased by 0.3 years to 4.1 years during January to June.

The total amount of car loans issued by banks has also significantly declined. In the first half of the year, 8.9 trillion soums were allocated for car loans, 2.1 times less than the same period in 2023. Consequently, vehicle prices rose only 3.2% from 1 July 2023 to 1 July 2024.

According to the Central Bank, a reduction in vehicle sales transactions and decreased demand may be linked to a rise in vehicle registration fees. From 1 April, registration and re-registration fees increased 68-fold, from 34,000 to 2.32 million soums (currently 2.56 million soums), and for electric vehicles by 15-fold. In May, the Minister of Internal Affairs returned the re-registration fee to 10% of the Basic Calculation Value (BCV), but the registration fee remained unchanged.

As a result, in the first half of the year, the number of notarized purchase agreements fell by 25% compared to the same period in 2023, totaling 442,800 transactions. Car sales in June dropped to their lowest level since December 2021.

The market saw additional supply due to increased vehicle imports and domestic car production. In the first six months, 177,000 vehicles were produced (excluding specialized cars), a 9.6% increase over the same period last year. Additionally, car imports rose by 22%, reaching 36,000 units.

The concentration of car loans in bank portfolios decreased, with the Herfindahl-Hirschman Index (HHI) falling below 1500 by the end of the first half, down 1004 points from the same period in 2023.

The HHI measures market concentration based on competition levels: low concentration is below 1000, medium is 1000-1800, and high is over 1800.

For most banks, where car loan volumes doubled over the year, car loans account for less than 40% of the credit portfolio. This reduction in concentration risk, connected to vehicle price changes, now affects only a limited number of banks, the Central Bank emphasized.