An interview with Sohail P. Ahmed Chief Executive of
By Syed M. Aslam
Jan 31 - Feb 06, 2000
Sohail P. Ahmed has a long association with the automobile industry. He
has served in top administrative capacities with some of the local car manufacturers and
auto parts makers. Automobile industry is more than a vocation for him it is what he
calls his passion.
Sohail P. Ahmed is the Chief Executive of Thal Engineering, a company
of House of Habibs. Thal manufactures car air conditioners under license from Denso
Corporation of Japan. It supplies complete range of car air conditioners to Suzuki, Toyota
and Daihatsu in Pakistan as well as marketing them in the after-sales replacement market.
It also provide complete technical assistance and support which includes installation of
new air conditioners, maintenance, periodic check-ups, complete spare parts backup and all
types of repair or customisation.
PAGE talked to Sohail P. Ahmed. The following are the excerpts of the
Sohail P. Ahmed on the lack of direction of the Auto Industry
Much has been said about the absence of long-term consistent policies
but hardly anybody elaborates what it really means. To me it means that the government
should chalk out a plan to highlight the persons per car ratio in the country at present
and define what it should be within a specific period in future alongwith the range of
vehicles, local content (both content & % specific) etc as parts of an overall vision.
This would allow investors to plan and evolve a strategy to achieve the objective.
Uncertain policies and adhoc decisions not only shy away any potential foreign investment
but also create unrest among the existing manufacturers due to uncertain market need,
lower production volumes and lesser than expected returns on investment.
The uncertain policies have also resulted in the lack of transfer of
technology as well as development of it locally, primarily because more emphasis on
hand technology i.e. technical and a much lower priority accorded to
mind technology' i.e. technological. We have to start training the minds instead of
just the 'hand's. We will remain technical oriented instead of technology oriented unless
such a change is being made. We would also keep on suffering from sense of direction, lack
of vision and the necessary leadership in the auto industry, just like any other sphere of
. . . On under-utilisation of collective production capacity.
Market expansion measures and market expansion attitudes are necessary.
This will help to reduce prices and will benefit everyone, the consumer, the government,
the industry, the job market etc.
The assumed market expansion never took place. Suzuki produced 42,000
units in 1991-92 which declined to 50% in mid nineties and has risen back to 32,805 units
last year. The projected market expansion depended on a number of factors firstly on
favourable government policies which never came; the increased car leasing facilities
which did not take place due to concern about security of recoveries in the absence of the
needed repossession laws, and the deteriorating law and order resulting in rampant auto
thefts and snatchings. Another major detriment has been incessant rupee devaluation
resulting in increase in prices compared to stagnant purchasing power. The high
withholding on the import of CKDs and spare parts which still remains a high 60 per cent
levies including 35 per cent duty, 15 per cent sales tax and 5 per cent plus, tax at the
import stage, have also effected the market size. Instead, sales tax at the retail stage
could help balance the equation as all sales, irrespective of source would be equally
. . . On why higher deletion level has not helped reduce prices.
Higher deletion level has reduced the prices of vehicles, which would
be much more expensive, if imported built-up at the same levies.
The reduction is however not as visible because the constant
devaluation of currency has highly increased the cost of the imported CKD pack offsetting
the saving of localisation.
Secondly, localisation will be cost effective if volumes are available,
as considerable investments have to be made to localise. In fact it could make it more
expensive if the production volumes are low. The low production volumes has also made the
manufacturers dependant on price increases instead of turnover to make a profit and create
a return on the high investments. Moreover, a chunk of the market is denied to the local
assemblers due to smuggling and import of used vehicles, the latter has been considerably
reduced by the government policies, but smuggling continues unabated.
The case of the manufacturers of auto spare parts is worse. Smuggling,
under invoicing, misdeclaration has about 80% share of the parts market. If the government
will somehow be able to reduce smuggling and under invoicing by just 25%, vendor industry
would grow by two-and-half fold. It is ironic that on one hand the government is
advocating indigenisation which requires big investment but on the other it fails to check
smuggling to ensure adequate returns on such investment. This would be a great market
expansion effective activity and will benefit the consumers, the industry, the government
and the common man.
. . . On heating up competition in the small car segment.
The entrance of new assemblers such as Hyundai and Kia which have
already started local production and Daihatsus Cuore in near future as well as
Daewoos plans to assemble cars in Pakistan would have greater product and price
choice for the consumers and will thus expand the market, but marginally. However, the
cake will remain much the same meaning that individual manufacturer would have to fight it
out for the market. This is feared to result in 'cannibalisation'.
. . . On what could be done'?
There are only two steps to get the auto industry out of its current
stagnation and impasse. Number one, the government should give a clear vision of what is
best for the government and the Country 10 years hence and then adhere to the enunciated
vision, irrespective of changes in the government and two, the government should adopt
market expansion policies, as appropriate policy, administrative and physical measures to
stop smuggling, under-invoicing and misdeclarations; enhanced and easier car financing
schemes will follow with lower mark-ups and affordable down-payment and monthly