An interview with Dewan Muhammad Yousuf Farooqui,
Managing Director, Dewan Farooque Motors
By Syed M. Aslam
Jan 31 - Feb 06, 2000
The face of Pakistani automobile industry has changed with the entrance
of Dewan Farooque Motors which is a part of Dewan Mushtaq Group whose diversified
activities comprise sugar mills, textile mills and fibre manufacture.
Dewan Farooque Motors Limited (DFML) has a technical licensing
agreement with Hyundai Motor Company and technical collaboration agreement with Kia Motors
to produce and market a number of models of cars, light commercial and 4x4 vehicles of the
two South Korean companies.
DFML has also signed an agreement with Sindh Engineering in Karachi to
facilitate the assembly of Hyundai Shehzore one ton light commercial
vehicle. At present, Hyundai Shehzore is being assembled at the Sindh
Engineering assembly plant in Karachi. DFML will produce 2,400 trucks in the initial year
and has plans to gradually increase the volume three-fold to 7,000 units in next five
DFML has developed an interim plant to assemble 1300 cc Kia Classic
passenger car in Sujawal, District Thatta, some 100 miles southeast of Karachi. The first
fully loaded Classic rolled off the assembly line on the 15th of this month. DFML plans to
produce 3,500 units of Kia Classic in the initial year with 5-6 per cent growth every year
The permanent plant at the same site is in its first phase of
construction and will be completed in July. The total cost of the project is Rs 1.8
billion. The plant will have a production capacity of 10,000 vehicles on single-shift
basis which is expandable to 20,000 units. The plant will be equipped with the latest
assembling and related facilities including state-of-the-art C.E.D paint shops.
DFML will also assemble and progressively manufacture 1000 cc Hyundai
Santro Plus cars aimed at small car niche of the market for middle income group. The
assembly will start next month and the cars will be launched into the market by the end of
the same month at its plant.
In addition, there are plans to manufacture 1,600 cc EFI Kia Shuma car
by third quarter this year plus a 4x4 Kia Sportage, a sports utility vehicle
(SUV), by end of this year. DFML has plans to introduce two more models of Hyundai
including a 12-15 seater diesel commuter van next year.
Dewan Muhammad Yousuf Farooqui is the Managing Director of Dewan
Farooque Motors. The young and dynamic entrepreneur also holds the portfolio of Minister
for Labour, Transport and Industries of Sindh. PAGE talked to him about the issues
concerning the automobile industry in general, and DFML in particular.
Dewan Yousuf feels that deletion programme thus far has only resulted
in the localisation of small parts only. He is also worried about the absence of economy
of scale and the overall low production volumes. The failure to induct the localisation of
hi-tech and precision engineered parts and most of all the incessantly increasing prices
by local assemblers, all of which are Japanese, also seem to bother him.
The entrance of Korean car manufacturers such as Hyundai and Kia with
whom DFML has technical collaboration agreements will bring real competition in market
which is driven more by price than anything else. The collaboration with Korea would not
only be more cost effective but will also result in increased transfer of technology as
Korea is more open to it than the Japanese, he added.
He foresees an expansion in the demand of cars as the emerging
competition will provide better choice at competitive prices to the people, who thus far
had no option but to buy Suzuki cars which have remained unchanged since the start of
their local assembly in 1983. "We are retailing the fully loaded 1300 cc Kia Classic
sedan at a competitive ex-plant price of Rs 475,000 compared to the 1000 cc Khyber Limited
which retails for Rs 484,000."
Dewan Yousuf also expressed concerns at the absence of Research and
Development and the non-committal attitude of the local assemblers towards it. It took
Suzuki 17 years to achieve 60 per cent deletion and that was forced and unvoluntary.
Seventeen years should have been a long enough period to at least achieve a respectful
deletion level of 90 per cent, he added.
Dewan Yousuf said that selection of Sujawal, an area in interior Sindh,
shows the commitment of the Dewan Group towards its social obligations. In addition, he
said, we have plenty of undeveloped land in the vicinity of the Sujawal plant (which was
completed in a record time of just five-and-half months) to invite vendors to develop
their plants. This has never before happened in Pakistan. Unlike other auto assemblers, we
would like to help the community to benefit from the development of an area which thus far
has failed to draw attention from any industrial concern. The bonus point is this that
Sujawal is less likely to suffer from the incessant law and order situation and political
unrest if the plant had been located in or around Karachi, he added.
The initial deletion target set and achieved for Hyundai Shehzore
pickup is 28 per cent, Kia Classic 31.5 per cent and Hyundai Santro Plus 38 per cent. To
promote localisation, the government should encourage vendor-to-vendor collaboration plus
better financing facilities for the vending industry at reasonable interest rates. It
should also encourage foreign investment in the vending industry which requires heavy
He said that the rationalisation of import tariff is necessary to help
reduce the prices of locally assembled vehicles. However, it should be linked to the
deletion level of an individual company the tariff should be lower for those
assemblers who have achieved a higher deletion level.
In addition, he said, that the automobile industry needs certain
protection from the government to help develop the economy of scale to ensure better
return on investment which in turn would result in increased investment in this important
sector of the economy. The importance of a consistent long term policy is one of the basic
pre-requisite while the government should also consider to abolish the 10 per cent
withholding tax on the payments made by local assemblers to their foregone principals for
the transfer of technology.
He stressed that Pakistani market offers a big potential which has yet
to be fully exploited. Competitive prices, stable political situation and an improved
economy can help boost the automobiles sales, particularly that of passenger cars in the
country. Cars are no more a luxury but rather a necessity and the emerging competition
will help bring down prices to affordable levels. In addition, newer car leasing schemes,
such as the Citibank car financing scheme for DFML, would help push car sales in the near
future, he added.
After all, he concluded, Dewan Farooque Motors motto is
Driving the Economy Forward.