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Cover Story

Jun 05 - Jun 11, 2000

An interview with Farhad Zulfiqar, Managing Director

Indus Motor Company is the local producer of Toyota Corolla cars and Hilux trucks in Pakistan. The Company's assembly plant at Port Qasim near Karachi became the first Toyota plant anywhere in the world to produce 850 cc Daihatsu Cuore compact car which is also being marketed through Toyota's dealership network nationwide. PAGE talked to the Managing Director of the Indus Motor Company, Farhad Zulficar, about the contribution of the car industry of the country. The following are the excerpts of the exclusive interview:

PAGE: What's been auto industry's contribution to the local economy?

Farhad Zulficar: Pakistan's large, and ever-increasing, population needs to promote the auto industry as it creates employment for skilled engineers and technicians. Currently, over 125,000 persons are employed by the local auto industry, either directly or indirectly. It is mainly due to this reason that even the developed world protects the auto industry through quotas. In Pakistan, the industry is also a big revenue contributor — it contributed a revenue of Rs 7 billion last year while the auto vending industry contributed another Rs 3 billion. Besides the significant revenue contribution, the industry also assists in the transfer of technology and the local engineering industry to produce substitute parts and components to save $ 500 million annually.

PAGE: What kind of support do the local auto industry needs from the government?

Farhad Zulficar: By and large the government policies have been supportive — the primary being discouraging the import of new and used cars into the country through tariff measures. This has not only encouraged investment in the industry but has also attracted additional investment. Today Korean car manufacturers are competing with major Japanese manufacturers like ourselves, Suzuki, and Honda. The industry, however, has all along been requesting for a long-term 5-7 year policy, the finalisation of which will give a big boost. The government is discussing with the auto and vending industry for a long-term policy about the WTO Agreements. The policy is expected to be finalised at the end this year while the industry has been assured that the government will continue to support the local industry through tariff measures discouraging imports.

PAGE: The first quarter of this year witnessed the launching of Daihatsu 850 cc Cuore and Dewan Farooque Motors' 1300 cc Kia Classic and 1000 cc Hyundai Santro Plus cars. How the emerging competition change the face of the local auto industry?

Farhad Zulficar: Today Pakistani car buyers enjoy a choice of products and prices in all segments of the car market, be it small or large size cars. There are Suzuki, Daihatsu and Hyundai to lure the small car buyers while a wide range of Toyota, Suzuki, Honda, and Kia products compete for the 1300 cc and above segment of the market. There are locally produced cars to cater to every taste and all budgets. The competition has the potential to reduce the massive under-utilisation capacity of individual car producers as it has prompted them to better the sales and marketing efforts to offer competitive prices, improve the quality of their products as well as after-service facilities. The emergence of the competition today allows the customers to not only select a car of his choice but also to maintain it in a condition which ensures a higher resale value than any other time in the past.

PAGE: What's the initial response to Daihatsu 850 cc Cuore compact like?

Farhad Zulficar: Cuore was launched on May 25 this year. Cuore, the first real compact car introduced here is very popular not only in Japan but also in Malaysia. The initial response to Cuore here in Pakistan has been excellent — the production for first three months are already fully booked. This will help our company to increase the overall utilisation of our production capacity which for Cuore is 10,000 units per annum. However, we also understand that the car market in Pakistan has not been expanding as expected primarily due to political uncertainty and economic environment in last number of years. Thailand with half the population produces ten times cars than that produced in Pakistan annually. This indicates the true and the future potential of the Pakistani auto market.

PAGE: You blame heavy taxation as the single major factor contributing to high car prices in Pakistan. How do you justify that?

Farhad Zulficar: On an average 25-30 per cent of the retail prices of locally produced cars comprise governmental revenues in the form of import duty, sales tax, etc. Reduction in taxes would help reduce prices of the cars and to assist in creating volumes and better capacity utilisation. If the government introduce stable policies throughout the auto industry like the one it has initiated in the Textile industry it would increase the pace of investment in the auto sector which in turn could accelerate the GDP growth. However, it is not true that car prices in Pakistan is higher than in the neighbouring countries like India, in fact they are competitive if input costs are compared.

PAGE: What's the potential for car exports from Pakistan?

Farhad Zulficar: Potential will have to come at a much later stage with local contents and volumes made more effective for international competition. However, parts exports is in process expected to expand further within next few years. For the time being the replacement part industry is immensely threatened by massive entrance of parts under scrap valued at negligible import duty. Such widely used items as oil and air filter, brake pads, shock absorbers, lighting assembly, spark plugs, wind screen threatens the very survival of the local vending industry. Only 5 per cent of the replacement parts market is fed by the local industry the rest is fed by the parts getting into the country unscrupulously through the connivance of everyone involved causing loss of billions in revenue to the government.