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1- TRADE GLOBALIZATION
2- ECONOMIC PACKAGE BY NEW PM
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TYRE INDUSTRY IN PAKISTAN

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TYRE INDUSTRY IN PAKISTAN

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Despite a strong industrial growth, the tyre industry of Pakistan could hardly meet 12 to 15% demand

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By AZAM ALI
Aug 30 - Sep 05, 2004
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The impressive development in the communication sector besides an all time high growth in the automobile industry altogether have elevated the tyre industry as a vibrant area of investment in Pakistan.

Besides catching eyes of the local investors, several other countries are also taking keen interest in the tyre industry of Pakistan obviously due to robust growth in demand for tyres.

The multi-national tyre producing companies are taking special interest in tyre industry because the capacity of local industry was not suffice to cater to the need of growing vehicular population in the country.

Despite a strong industrial growth, the tyre industry of Pakistan could hardly meet 12 to 15% demand and the shortfall paves the way for the international tyre companies in Pakistan. Apart from vehicles population, the dilapidated condition of the roads stand was another reason for high incidence of tyre consumption in Pakistan.

Tyre technology, at international level has expanded that not only for every nature of vehicle a separate tyre is designed but also two to three kinds of tyre are designed and manufactured for one nature of vehicle depending of its use. For one vehicle two to three type of tyres are manufactured internationally which are recommended for nature of use of vehicles.

In Pakistan tyres of trucks and buses are on top of consumption as 50% of the total consumption in the country for these two four wheelers are on top of running which is a commercial use, while bicycle and trolley tyres are in bottom of consumption figure.

There is no definite statistic of tyre consumption in Pakistan, a tyre importer said. He said that there are many rough ideas about the import, local production, and smuggled tyres. The government of Pakistan's department of statistic too has rough ideas about the figures as tyre consumption increasing without any scientific direction.

An importer said more than 50% tyres smuggled into the country. The smuggling methods change according to situations at boarders. This must be a fact that why no investors are establishing tyre manufacturing plants in our country although the fact also remains on the record that Karachi, Lahore, and Rawalpindi are the part of the country where more than six tyre manufacturing plants are badly required.

Apart from tyre usage internationally, in Pakistan tyre is sold from the rate of Rs. 250 to Rs. 350,000. The costly tyres from the rate of Rs. 40,000 to 350,000 are used for earth moving vehicles for construction and mining purposes.

There is a huge difference in the prices of smuggled and legally imported tyres, as the importers pay 60 percent tax and other duties, while the smugglers do not contribute even a single penny to national exchequer, the huge influx of smuggled tyres in the country is causing a loss of Rs 5 billion annually to the national exchequer and is harming local industry and legal imports of tyres.

The price of 12-inch locally produced tyre is 1200 and the same size in smuggled category is available at Rs 1,000, while a legally imported tyre of 12-inch costs Rs 1550. Similarly, the cost of 13-inch locally produced tyre for the end consumer is Rs 1,150, while the imported ones are available at Rs 1,900 and the same variety of smuggled tyres at Rs 1,200. The price of 14-inch tyres produced locally is Rs 1,700, and that of imported ones is Rs 3,000, while cost of smuggled tyre for end consumer is Rs 2,000.

 

 

The high cost of importing tyre is the main cause of smuggling. According to a rough estimate, the total consumption of tyres in the country, excluding two-wheelers, is around 3.5 million per annum. There is only one major company General Tyres that is engaged in manufacturing tyres of different categories here. General tyres is producing one million tyres annually. A local company in Peshawar, named United Tyres, also manufactures around 100,000 tyres annually.

But traders said that on the long run, the end consumers do not benefit from the lower cost of smuggled tyres. There is no benefit for the consumer while using smuggled tyres because they have no warranty, as against the locally produced and legally imported tyres. The use of smuggled tyres is also one of the main causes of road accidents in the country. The locally manufactured tyres for Toyota passenger cars are available at Rs 1,900 but the cost of same imported tyre is Rs 2,500 and retail price of smuggled tyres is Rs 2,100.

According to another rough estimate with a local dealer highest volume of smuggled tyres is for passenger and light trucks. The annual consumption in the country of tyres for passenger cars is 1.3 million, while that of the tyres for light trucks is 700,000. According to estimates, the consumption of trucks and bus tyres is 1.2 million per annum. Smuggling of trucks and bus.

The General Tyre and Rubber Company of Pakistan Limited however plans to raise exports of tyres worth one million dollars next year. Although it has started exporting tyres to a number of countries. This year exports has been estimated by the company as US$700,000 and thus earn foreign exchange. The next year's target is US$1,000,000. The GT, the country's largest tyre production company, would also be expending its annual capacity by 30 per cent to 1.3 million tyres with an investment of Rs500 million. The GT has been consistently investing in the expansion of its capacity to meet the growing demands of tyres. The GT's capacity has been raised from 120,000 tyres annually to 1 million tyres in 5 phases. Although the General tyre is a global brand, produced in five continents North America, South America, Europe, Africa and Asia. But it has not shifted tyre technologies into the Pakistan it is manufacturing tyres for cars, light trucks, heavy trucks, buses and tractors. The General Tyre uses the number one tyre manufacturing technology in the world. But here in Pakistan story is different. The company has estimated the total tyre demand of the country 53 per cent which is met through import, 31 per cent by local industry and only 16 per cent by smuggling.