By SYED
M. ASLAM
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.
