Competition heats upfor the benefit of buyers


June 09 - 15, 2003



Competition can do magic. It has forced the three traditional motorcycle manufacturers, all Japanese; Honda, Yahama and Suzuki, to slash the prices of their respective models substantially. The availability of lower priced Chinese motorcycles, and their growing demand, is the primary reason for the welcomed reduction in prices. Otherwise what can explain the failure of these manufacturers to pass off even a percentage of benefit of substantial shedding of value by the dollar in last 20 months.

The entrance of a number of locally produced Chinese motorcycles in the market in the last five years, and their growing share of the market at the expense of the traditional manufacturers, have given buyers a choice in price. That also explains the record production of two-wheelers expected this year.

Just how successful the Chinese two-wheelers have been to wrestle a substantial share of the market at the expense of the traditional manufacturers is evident from the following facts. According to statistics compiled by Pakistan Automotive Manufacturers Association (PAMA) the total numbers of two-wheelers produced by its four members Honda, Yamaha, Suzuki and Sohrab totaled over 131,000 during the first 10 months of the current fiscal ended April 30.

In addition to the 131,000 units produced by the four PAMA members, 40,000 units of Chinese motorcycles Pak Hero, Qingqi, Star, Super Hero and Jinan were produced in the country while another 8,000 Chinese motorcycles were imported into the country in the Completely Built-Up (CBU) condition during the same period.

Thus, of the total 179,000 motorcycles, locally produced as well as imported that hit the retail outlets during the first ten months of the current fiscal, 48,000 or 27 per cent were Chinese. The gain of Chinese two-wheelers at the expense of traditional manufacturers explains the meaningful reduction in prices announced by the traditional manufacturers recently. Particularly, when they did not feel it important to slash the prices despite the erosion of the value of the dollar in the last 20 months.

The figures compiled by PAMA also shows that production volume of its 4 members has grew by over 41 per cent during the first ten months of the current fiscal compared to 1997-98 despite an erratic performance. Please see table attached.

Talking to PAGE, the General Secretary of the Association of Parts and Auto Rickshaw & Motorcycles, Sabir Shaikh, said that the substantial reduction of an average Rs 10,000 by the traditional manufacturers clearly show that they were capable to lower the prices all along. "The reduction of prices by an average Rs 10,000 by Honda, the market leader which sold over 108,000 units last year, translates into a loss of over Rs 1 billion overnight. It simply means that it is in a position to absorb this substantial loss in earnings all along but resorted to it only to protect its market in the face of emerging competition from the low-priced Chinese counterparts."



Sabir said that with the implementation of the WTO only 19 months away, it would be wise for the traditional manufacturers to do away with their monopolistic tendencies as the country would have to open up its market for completely built-up foreign two-wheelers the duty at the duty of 25 per cent max. "The government announced to cut the duties on the completely built-up (CBU) motorcycles from highly discouraging 105 per cent to 75 per cent in the last budget. However, the duty was increased by 15 per cent to 90 per cent two months later and yet the import of some 8,000 CBU units during the first 10 months of this fiscal show that despite high duties, the total impact of which adds up to 140 per cent, the imported Chinese motorcycles are still selling in the range of Rs 43,000, way below the traditional brands.

"If the import duties on completely knockdown units 30 per cent for licensed manufacturers with exemption to 6 per cent Income tax and 25 per cent for unlicensed manufacturers along with 6 per cent Income tax should also be reduced. It would help reduced the prices of locally assembled Chinese motorcycles even further by as much as Rs 10,000 to an affordable level of Rs 33,000.

"As is the local manufacturers have to follow a strict deletion policy requiring them to use 85 per cent of the local parts. If the import duties of the CKD units is reduced it would help result in further meaningful reduction in the retail prices of two-wheelers to provide an affordable choice to the people. As is, a 70 cc completely built-up motorcycle is available from China at $ 280 (roughly Rs 17,000) C&F and is available in the market at affordable Rs 43,000 inclusive of landing cost impact of 140 per cent."

Let's see if the import duty on the most affordable means of transport is reduced in the Budget 2003-04 to stir an even more healthy competition for the benefit of the transport-starved people.















2002-03 (upto April '03)