Big international car manufacturers are making their way into the Pakistani automobile industry after the current acceleration in the auto sector due to the Automotive Development Policy (ADP) 2016-21 which provides handy opportunities and benefits for companies to invest in the country.
In the backdrop of the surge in passenger car sales that recently crossed 200,000 units for the first time in Pakistan, all of the country’s automakers are planning production increases to satisfy brisk domestic demand. According to Nikkei Asia Review Web, new players are also flocking to this market of 200 million, lured by government incentives and the opportunity to tap a growing middle class.
Pakistan saw a record high of roughly 218,000 passenger cars sold in fiscal 2016, which ended last June. The leader was Pak Suzuki Motor, a subsidiary of Suzuki Motor, which landed an order from the eastern province of Punjab for 50,000 cars. The province’s government plans to use the vehicles as taxis as part of a job-creation program.
Indus Motor, a joint venture between Toyota Motor and local conglomerate House of Habib, is doing well with its mainstay Corolla, reporting that sales grew 11 percent on the year to 65,000 in fiscal 2016.
“The market is so brisk that production can’t keep up,” Indus Motor Vice Chairman Toshiya Azuma said. Azuma expects even more growth to come. “Demand in India, our next-door neighbor, is about 4 million cars [including commercial vehicles] a year, so annual sales of about 600,000 cars is well within reach in Pakistan.”
Honda Motor joint venture Honda Atlas Cars also saw record-high sales, at 35,000 Civic and City units for calendar 2016, up about 50 percent on the year.
Atlas group No. 2 and CEO of Atlas Honda (a separate entity from Honda Atlas Cars) Saquib H. Shirazi said, “The new Civic is the primary driver. We’re expecting sales of around 50,000 in 2017.” These automakers are benefiting from a number of converging tailwinds. Household incomes are rising along with Pakistan’s growing economy, while prices for gasoline and diesel fuel are on a downward trajectory.
Interest rates on auto loans have fallen sharply, averaging below 10 percent compared with nearly 18 percent in fiscal 2008.
More recently, the China-Pakistan Economic Corridor initiative has spurred investment in the country’s infrastructure, raising hopes that Pakistan’s highway network will be completed before long.
Pak Suzuki sold about 128,000 cars in Pakistan in fiscal 2016 and controlled about 58 percent of the passenger car market.
“Sales of models other than taxis, which are subject to special demand, grew by about 20 percent on the year,” Managing Director Hirofumi Nagao said. In response to this spike in demand, the company plans to invest $460 million in a new plant.
The automobile sector for years has been monopolized by a few brands.
Here are a few top brands that are going to locally assemble their vehicles in Pakistan.
French car manufacturer Renault will start assembling cars in Pakistan as early as 2018. This will mark the first time a European car manufacturer made its way to the Pakistani market. Renault will be manufacturing both SUVs and sedan cars. This development will create around 10,000 direct and indirect job opportunities for Pakistanis. According to the Board of Investment (BOI) chief, the company will also make efforts to revive the manufacturing of Nissan vehicles in the same plant.
The South Korean car manufacturer KIA announced in December 2016 that it would start assembling vehicles in Pakistan. Lucky Cement will invest Rs12 billion to set up a new company to start manufacturing and assembling of Kia vehicles. Kia used to be manufactured in Pakistan, but due to disappointing and faltering sales, manufacturing was halted. Lucky Cement also announced that through this new venture they would also market and sell, besides import and export of, all types of Kia vehicles, parts and accessories.
Hyundai Motors through its union with Nishat Mills will be assembling its vehicles in Pakistan. The two companies together will set up a Greenfield project for assembly and sales of HMC passenger and 1-ton range commercial vehicles in Pakistan.
Hyundai also used to manufacture its vehicles in Pakistan but left the country mainly owing to the to the liberal used car import policy in the Musharraf regime.
Audi AG also has set its eyes on the Pakistani market as reportedly it approached the Board of Investment through its local authorized dealer, Premier Systems Private Limited with a proposal to start an OEM (original equipment manufacturer) plant in Pakistan.
Volkswagen Commercial Vehicles is also in final talks with Premier Systems Private Limited to set up a manufacturing/assembly plant for its Amarok and T6 (Transporter range) models. The company will use the same plant that Audi is going to build for the assembly of its own vehicles, as it’s owned by Volkswagen Group.