By Syed M. Aslam
Sep 23 - 29, 2002


A. Rashid Ibrahim's association with Pakistani auto industry dates back over fourty years. A DAE (Diploma Associate Engineer) from prestigious Karachi Polytechnic at Site, he worked for the Atlas group of companies for almost 24 years in various senior management capacities. He was instrumental in setting up Honda motorcycle plant at Karachi and a number of its other projects in the country as well as former East Pakistan. The association helped him obtain training at Honda plants in Japan and Thailand related to manufacturing of auto components. He helped set up Yamaha motorcycle project at Uthal and carried out various expansion programmes for Honda, the last one being die casting shop and machining facilities for manufacture of engine components and other parts. He worked on project for assembly cum progressive manufacture of Mitsubishi Pajero. He served as member of the sub committee of the Engineering Development Board, Ministry of Industries and Production for deletion of components for both two-wheelers and cars. The hands-on technical experience and close relation to the auto vending industry allows him to speak about the auto industry with authority.

PAGE: What are the major issues faced by the local auto industry?

RASHID IBRAHIM: Pakistani auto industry does not lack from dearth of professional human resources or innovative ideas. However, the heavy dependence on imports both parts, accessories and raw materials and high duties and taxes they are subjected to, incessantly increasing prices of utilities, and absence of economies of scale are pushing the prices of locally produces automobiles to unaffordable levels. This is true for both two-and the four-wheeler vehicles. All these factors have pushed the production costs to deprive the industry to meet its real potential by discouraging sales due primarily to high retail prices.

PAGE: What's the overall impact been like?

RASHID IBRAHIM: The high retail prices are resulting in low sales volume. The collective production capacity of the auto industry, particularly the car, remains under-utilized. With fixed overhead costs this collective under-utilization of the production capacity is pushing the prices which have seen no signs of slowing down over the years.

PAGE: Are these the only reasons responsible for the high prices?

RASHID IBRAHIM: More or less, yes. However, it may be realized that while the interests of both the government and the auto producers are protected the same is not true for the consumers. Duties and taxes make-up the biggest portion of the retail prices of the automobiles and motorcycles while high profits also makes a bad situation worse. Without rationalizing the prices auto sales would remain depressed despite growing demand and active role the leasing companies are playing to push the sales to a respectable volumes.

PAGE: The local auto industry has been accorded protection against imports vide excessive high duties? What would be the impact when Pakistan has to open its market for the imported autos under the WTO two years from now?

RASHID IBRAHIM: The absence of genuine competition has let the local industry to dictate the market in terms of both prices and the quality. Pakistani auto industry is looking at an extremely difficult time in the years to come. It is imperative for the foreign principals to reduce their prices of Completely Knock Down kits. The local auto vending industry should also be allowed to play a greater role to reduce dependence on imported parts and accessories.

PAGE: What restricting the vending industry to perform?

RASHID IBRAHIM: First of all the auto vending industry which employees over 100,000 persons directly and indirectly is not treated like an industry for purpose of loans by the banks and financial institutions. The vending industry primarily comprises of small and medium entrepreneurs who has limited funds. Auto vending industry require heavy investment, particularly for the manufacture of engine and precision-engineered parts. While the small and medium entrepreneurs just don't have the means to invest such heavy funds some of the big investors who have the means don't see it economical to invest due to low volumes which don't justify the investment. In addition, a small number of chosen few are allowed to import the tools and equipments needed by the vending industry and they have seen it fit to sell the items at excessive prices.

PAGE: What about the government policies?

RASHID IBRAHIM: The inconsistent policies of the successive governments, particularly those related to deletion, have taken a heavy toll on the auto industry. They have been detrimental to the local vending industry to produce inexpensive local substitutes, particularly the high-priced precision engineered parts. This in turn, has pushed the prices to unaffordable levels to limit the overall performance of the industry depriving it of increased sales.