Home / This Week / Cover Stories / More automakers taking interest in Pakistan

More automakers taking interest in Pakistan

RENAULT TO PRODUCE CARS

Renault, a French car manufacturing company, is expected to start assembling cars in Pakistan by 2018. This will be the first time that a European car manufacturer will set up a plant in Pakistan. Established in 1899, the automobile company produces a range of cars and vans, and has also manufactured trucks, tractors and tanks, among others vehicles in the past.

Renault would initially make an investment of $100 million to produce 6,000 vehicles per shift at the plant set up by Ghandhara Nissan Motors in Karachi. The company already has an alliance with Nissan since 1999, making it the longest running transnational partnership between two major manufacturers in the automotive industry. In 2013, Renault was the eleventh biggest automaker in the world by production volume. Renault intends to manufacture 16,000 vehicles (both SUVs and sedan) in three shifts and to raise the production capacity to 50,000 in two phases.

The major attraction for companies such as Renault is the new policy which allows these investors to import tax free manufacturing plant equipment and pay less taxes on import of parts when assembly starts plus various other incentives that can help new entrants in the automotive industry to set up their operations in Pakistan.

This investment might bring the much-needed diversity in the stagnant, locally manufactured vehicles line-up. It is being speculated that the company will bring the Duster in Pakistan; expected to be priced at Rs2.5 million. The company will also introduce 1200 cc cars, which will be aimed to cater the requirements of middle class consumers.

GERMAN TRUCK COMPANY MAN SE TO ENTER SOON

Due to the introduction of China-Pakistan Economic Corridor (CPEC) in Pakistan, the demand of heavy vehicles is expected to grow quickly and manufacturers are flocking to Pakistan to capitalize on this. Volvo has already signaled its plans and now it has another competitor (MAN SE) vying for the same space.

The 250-year old German company has been analyzing the Pakistani market for over five years and the company is expected to make the official announcement about its entry in couple of months. MAN SE is currently operating through fully-owned subsidiaries or joint ventures with local companies in a number of prominent countries such as India, Poland, Turkey, China, the US, the UAE South Africa, Uzbekistan and Portugal.

CPEC has made a significant impact in Pakistan to revolutionize things. With a number of projects on-going and pending, heavy vehicles requirement is crucial. To meet these requirements, companies like NLC prefer to use imported trucks due to their high quality.

The auto partnership between Pakistan and Germany seems to be flourishing. Audi and Volkswagen are already setting up an assembly plant in Karachi and MAN SE is another German brand to join them. MAN SE, like Audi, is also Volkswagen AG wholly-owned subsidiary. The company is not only expected to set up the plants in Pakistan for local business but also export the cars, which in economic terms, represents a huge development.

LUCKY CEMENT TO ASSEMBLE KIA VEHICLES

Lucky Cement will invest up to Rs12 billion to set up an assembly plant for Kia vehicles. Lucky Cement will invest by way of equity in the proposed associated company to manufacture, assemble, distribute and export all types of Kia vehicles, parts and accessories. This is the second time that Kia, a South Korean company, will roll out vehicles in Pakistan. Its previous joint venture agreement was with Dewan Motors, which produced a limited number of vehicles following an unenthusiastic response from consumers.

In view of Kia’s bitter experience in the past, it is unclear how it will re-establish itself given the dominance of Japanese auto assemblers in Pakistan. Pak Suzuki Motor Company holds over 50 percent market share in the country’s auto industry followed by 28 percent share by Indus Motor Company (IMC). The entry of Lucky Cement into the car segment will further diversify the company’s revenue line and strengthen profits considering robust auto demand in the future.

HYUNDAI TO ASSEMBLE CARS IN VENTURE WITH TEXTILE GROUP

Hyundai Motor Company plans to set up a car assembly plant in Pakistan in a joint venture with local textile firm Nishat Mills. Hyundai’s return to Pakistan will boost the government’s efforts to shake up the Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki, who assemble cars in Pakistan with local partners.

Millat Tractors Limited has also announced that the company had decided to explore the option of joining the upcoming joint venture between Hyundai Motor Company and Nishat Mills Limited for the production of passenger cars and light trucks. The history of Millat Tractors goes back to 1964, but its assembly plant was set up in 1967 for the production of tractors imported in semi-knocked down (SKD) condition. From the production of just 8,000 units per annum with only two main product varieties in 1992, today the company is able to produce 45,000 units with eight different main models.

Pakistan’s car penetration is 13 vehicles per thousand persons, which is significantly lower than the regional average of 162. The strong potential for automobile growth exists due to a higher disposable income and low interest rate environment. The auto industry is now heading in the right direction because of the new auto policy, availability of financing and robust economic performance. If the present optimism persists, we foresee the market touching 350,000 units by 2025. If new entrants step in, the demand may go up to 500,000 units. It seems that the government’s strategy to persuade new players to enter in the local auto-manufacturing market of Pakistan is definitely shaping up for a better outlook.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

Check Also

Islamic finance education in Pakistan – challenges and growth

Islamic finance education in Pakistan – challenges and growth

Islamic finance industry in Pakistan has witnessed a strong growth in Pakistan over the last …

Leave a Reply