IQBAL has a diversified experience comprising a range of
industrial and business including petroleum, banking, pharmaceutical,
fast moving consumer products and most of all the automobiles. He did
his Master of Arts from the University of Karachi and did Master of
Business Administration in Marketing and Management from the US. He
started his career in 1982 with US multinational petroleum company,
Esso Eastern Inc. and has
since worked with a number of other multinational companies including
Union Texas Petroleum, Squibb Pakistan and Singer Pakistan. He was
also associated with a number of prestigious national companies
including Bankers Equity, Jaffer Brothers, etc. He has been actively
involved with the automobile sector since 1990 and has been associated
with Raja Group of Industries and also helped establish Fateh Motors
where he entirely conceived and executed Hero motorcycle. Presently,
he is working as the Chief Operating Officer of Dewan Motorcycles
Limited, the producer of Star brand two-wheelers.
Two-wheeler production in Pakistan was
heading for a record level in the fiscal 2002-03 ended last month.
What can explain the tremendous increase in production and sales of
IQBAL: Two-wheeler production in the country would touch
record 200,000 units during the last fiscal. And yet it would fall far
short of the 'real' demand which I have all along insisted always
remained between 500,000 to 700,000 units. However, the 'real' demand
has remained suppressed over the years primarily due to monopolistic
tendencies on the part of the three traditional producers of Japanese
motorcycles resulting in excessively high prices. Two-wheeler prices
have remained on discouragingly high to shy away middle-income and
salaried segments of the society for whom motorcycle should offer an
inexpensive mode of transport.
But the traditional producers have slashed
the prices substantially recently. Would they be able to retain the
IQBAL: I feel that the move came too late and that too
involuntary in the face of increasing competition from locally
produced Chinese counterparts. Otherwise what could explain the
indifference of these assemblers to reduce the prices in last three
years when the dollar lost a substantial portion of its value. The
fact is, the traditional producers chose to operate on extremely high
profits counting on the monopoly they enjoyed to remain comfortably
indifferent to the hardship it meant for the buyers.
So the locally assembled Chinese motorcycles
have been able to make inroads into the market. Is the growth
IQBAL: Certainly. The overall share of the Chinese
motorcycles in the local market is on a continuous increase. Presently
they have been able to take away over 27 per cent share of the market.
Five of these producers, including Dewan Motorcycles' Star are
collectively producing over 7,000 two-wheelers a month. In addition to
5 existing producers of Chinese motorcycles another three are in the
pipeline and I expect that during 2003-04, the collective production
of Chinese brands would touch 200,000 units to match the combined
productivity of traditional producers.
Leasing has provided great boost to the local auto industry boost.
What stops the two-wheeler industry to get a similar boost from
IQBAL: There are two primary reasons for the non take-off
of leasing in the two-wheeler segment of the market. Number one, the
high rate of snatchings and thefts of the two-wheelers, particularly
the market-leading brand. And number two, the negligible, nay almost
zero, rate of recovery of two-wheelers compared to 40 per cent for
cars. Number three, the leasing companies were unable to tap the rural
areas, particularly the Seraiki Belt in Punjab which makes up the
biggest market of two-wheelers and also interior Sindh, due to lack of
staff and absence of buyers' profile. In addition, high prices
combined with high mark-up rates pushed monthly installments to levels
which were unaffordable and high down payments made leasing an
unworkable option thereby negating the very concept of financing.
But things have changed for better at present.
they have. The heating up of the competition and the reduction of the
prices due primary to growing presence of Chinese two-wheelers and the
substantial reduction in the mark up rates at present makes leasing a
viable option presently. The Dewan motorcycles would be announcing a
big package soon to offer leasing at low down payment and mark up. The
most salient feature of the package is that it would be offered
through designated dealerships instead of leasing companies. The
buyers, thus, would deal directly with the dealers instead of leasing
Can the prices be slashed even further?
IQBAL: Yes, the prices of two-wheelers can be further
reduced provided the duty on the import of CKD kits is reduced. There
is an anomaly: The commercial rate of duty on CKD kits is 10 per cent
less than that for the kits imported under the deletion programme. I
personally feel that there should a zero duty on producers whose
deletion programme is approved for the benefit of salaried and middle
income segment to bring the prices to more affordable level.