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Highs and lows for the automotive sector last year

Automotive manufacturing sector is the backbone of engineering spectrum in any country but when compared to many developed countries, our automotive sector is still at infancy level. In Pakistan, automobile sector is mainly lead by the Japanese manufacturers i.e. Honda, Toyota, Suzuki, Yamaha, yet due to the implementation of Automotive Development Policy (ADP 2016 -2021) some Western and Korean players along with Chinese are entering into the market but till now the Japanese players dominate.

With a contribution of 4 percent to GDP and despite a decline of 57 percent in market value from its peak in May 2017 due to decline in sales owing to depreciation related price increase, the auto industry still boasts of following highlights in the year 2018:

  1. Ministry of Industries awarded Brownfield investment status to Dewan Farooq Motors Limited (DFML).
  • Nissan to begin Datsun production in Pakistan with Gandhara Nissan.
  • The All-new PRINCE Glory 580 SUV launched by Regal Automobile in Pakistan.
  • Jinbei launches the widest range of vans and minivans in Pakistan.
  • First automobile assembly plant in Pakistan received $66 million worth guarantee from World Bank Group.
  • ALHAJ Group signs agreement with Proton Motors in Malaysia.
  • Russian bus maker is willing to open an assembly plant in Pakistan.
  • Toyota Rush officially launched in Pakistan.
  • Kumho Signs Technology Transfer Agreement with Pakistani Manufacturer.
  • Honda Inaugurates New Motorcycle Factory in Bangladesh
  • Chinese carmaker FAW to launch new Hongqi SUV model in 2019.
  • Gandhara Industries becomes Forbes Asia “Best Under a Billion” Company for the second consecutive year.
  • Suzuki seeks Greenfield status to bring $450 million investment in Pakistan.
  • JW Auto Park worth $150 million officially inaugurated in Pakistan
  • Millat Tractors achieve success in export sector.
  • Belarus to increase machinery supplies to Pakistan.

Japanese automotive industry exists worldwide e.g. in USA, Canada, India, Thailand etc. but we see that the Japanese automotive manufacturers in Pakistan produce lesser variants with fewer features as compared to the global market. There are two main factors for that, one is the low market size (manufacturer perspective) and the other one is the lack of interest (consumer perspective). One of the issues which needs to be addressed is the localization of predominant component of an automobile in terms of performance and cost.

 

Localization of engine manufacturing is a difficult job as it needs a lot of investment and research and development.

Pakistan can learn a lot from the countries who have in recent past realized substantial growth in automotive exports. Thailand is prime example where in early 2000s their total automobile production is around 0.4 million and in the year 2017 they have produced around 2.0 million automobiles amongst, which they have exported nearly 1.2 million units which is 60 percent of their total produce. In order to overcome the issues in auto industry, following strategies could be implemented:

  1. Collaboration among assemblers, especially for the engine project.
  2. Develop and create supplier network.
  3. Develop automotive institute as stipulated in ADP 2016-2021.

Establishment of automotive institute provides the essential support mechanism for the sector. This institute could be the knowledge center for automotive industry development. It can also promote research and development culture, introduce new standards and policies in this sector. Some of the other benefits of such an institute are:

  • Support operation of organizations in testing standard, inspection and innovation development.
  • Development of human resources in automotive, auto parts and related industry.
  • Enhancement in competence of entrepreneurs for more productivity.
  • Collaboration among organizations in Pakistan and abroad for automotive industry development.
The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

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