The auto industry in Pakistan has come a long way
from its infancy stage to enhanced output in accordance with growing
domestic demand. However following the September 11 tragedy there was
considerable liquidity in the Pakistani market and no alternative
avenues for investment.
In such a scenario many people saw the automobile
sector as an attractive investment avenue. By paying a nominal down
payment speculators book cars in bulk quantity and thereby deplete the
supply of newly produced cars. In such a scenario genuine buyers find
that cars are not readily available as there is a waiting period of
approximately sixty days now. They can get early delivery of their
vehicle by going to an unauthorized dealer who can procure cars from
investors at a "premium". Cornering the supply of new cars by
the "investors' mafia" in this manner is a negative trend and
one that can retard the growth of the local car manufacturing industry.
Recently in order to discourage 'speculators', the
government has made registration in the name of car booker mandatory,
which would not be transferred before six months. "Whoever
purchases the car, it will be registered on his name and he cannot
transfer it for six months," announced Commerce and Industries
Minister Abdul Razak Dawood.
In future, Razak said, if anybody books a car, he
must give the identity card number to the dealer so that the car must be
registered in his real name.
He also announced that delivery time has been reduced
from 90 days to 60 days, after which car manufacturers would pay mark up
to the booker at the prevailing rate of State Bank of Pakistan (SBP).
Currently the auto industry has the capacity to
produce 120,000 cars annually on a double shift basis. The Original
Equipment Manufacturers (OEMs) have also been instrumental in transfer
of technology, value addition and manpower development. As a consequence
a vibrant auto vendor industry has emerged that is now not only
supplying parts to local OEMs like Toyota, Honda, Suzuki, Nissan, etc.,
but also exporting internationally.
Pakistan is engaged in the manufacture/assembly of
cars, trucks, buses, van / pickups, motorcycles, three-wheelers, 4-WD
vehicles and tractors. There are some 20 auto engineering industries and
thousands of ancillary and vendor units catering to Pakistan's
automotive industry. In the automobile line, units like Pak-Suzuki, the
Indus Motors, the Atlas Honda Motors, the Dewan Farooq Motors and the
Gandhara Nissan have set up their units for vehicles of various ranges.
The Association of Pakistan Automotive Parts and
Accessories Manufacturers (PAAPAM) was established in 1988. The main
purpose of this association is to safeguard the vendors industry and
provide financial and technical assistance to its members.
The up-coming automobile industry, last year, came
out from a decade of stagnation posting a growth of over 20 per cent —
which is the highest growth achieved in any manufacturing sector of the
country. This year, domestic demand for new cars has skyrocketed by
approximately 50 per cent.
As would be expected, given the limited market size,
production volumes have been low. But there are clear indications that
the industry has finally come of age, producing cars of eight
international brands in scores of models — all fully approved by the
original manufacturers for quality and endurance.
The introduction of new Corolla and Baleno models has
suddenly given a boost to the car demand within a very short period of
time. A leading assembler said that the demand flow, that came two to
three months back, had slightly reduced to some extent, however
assemblers have not slowed down the production.
Since its inception Suzuki had enjoyed the position
as market leader in small car segment, while Honda and Toyota competed
in the higher priced market. Suzuki commenced production in 1983 eyeing
the small and LCV car segment, 800cc- 1000cc. The industry was regulated
until early 1990's, after de-regularization, major Japanese
manufacturers entered the Pakistani market to produce locally.
Until recently Suzuki, Honda and Toyota dominated the
market but now new competition has emerged following the entry of
Daihatsu and Hyundai.
Vendor industry plays a critical role in the growth
of auto industry as all the components and parts are not manufactured
under one roof. Development of vendor industry means greater employment
opportunities, reduction in cost of production, lesser imports and
achievement of deletion programmes. Furthermore the vendor industry has
entered the export arena. Last year parts worth US$ 27 million were
exported around the world including the United States.
Both the private sector as well as the government
must make all out efforts to create a conducive environment for the
robust growth of the automobile industry where all the automotive parts
and components are fabricated locally pre-emptying the need for import
and thereby saving precious foreign exchange.
Automobile industry is a sector with lucrative
investment opportunities and the growth of the sector augurs well for