AUTO INDUSTRY: ON ROAD TO INDIGENIZATION

 

Need of the hour is to evaluate the auto sector impartially from the national perspective


By TALHA BIN HISAAM
Dec 22 - 28, 2003

Critics and other interest groups have long criticized the auto industry on various fronts, most of which have been external and controllable factors including unprecedented surge in demand through auto financing schemes from banks and achievement of deletion levels according to the programme implemented under the WTO pressure. The industry is alleged for charging premium and making late delivery of automobiles.

But the need of the hour is to evaluate the auto sector impartially from the national perspective, keeping in mind the overall role the industry is playing for Pakistan on the technological, HR development, employment, investment, industrialization and economic front.

The current direct investment by car manufacturers in the country's economy is over Rs. 8 billion, and today the domestic automobile industry contributes upwards of Rs. 30 billion a year to the national exchequer. Along with its allied industries, it provides a livelihood directly and indirectly to over 115,000 people including technicians, engineers and management staff.

Buyers in Pakistan now have a choice of various domestically produced models of Toyota, Honda, Suzuki, Nissan, Kia, Hyundai and Fiat cars and vans, Mazda coasters and Hino-Pak buses. Between 30,000 and 33,000 tractors are also produced in the country annually, a major boost to the agriculture economy.

Continued efforts of the auto industry to meet the increasing demand are evident from the fact that the production capacity has significantly been increased. The total production during July-October 2003 was 28,138 vehicles, compared to 17,417 vehicles produced in July-October 2002. This depicts a growth of 62 percent in the production of automobiles in order to meet rising demand. This achievement has only been possible through initiation of a second shift with most manufacturers.

Certain factions question the quality of locally manufactured cars and make baseless allegations on various aspects merely to convince the government that cars should be imported. In this process, they ignore the fact that auto industry has come a long way to where it stands now, and throughout the last 20 decades of progress, this industry has tried to implement international standards of quality manufacturing. At all major auto manufacturing plants, the system works so that before the prototype of a locally manufactured part is used by domestic manufacturers, it is tested by the original manufacturers at their facilities and given a certification of quality. This quality control sets a benchmark and ensures that all parts subsequently manufactured are of the same quality. They are checked for any possible malfunction before-hand to avoid any hiccups in the final assembly of the vehicle, allowing smooth operation.

Before the establishment of the auto industry, Pakistan knew no more about the auto parts manufacturing than what was available at Shershah for repairing used cars. Today, the automobile industry has made a lasting impression on the domestic vendor base by equipping it with international quality standards that have led to making it more export-oriented.

The fact is that though Pakistan entered into the field of auto parts exports less than four years ago, this year's target of US$ 55 million is likely to be exceeded. Vendors are even exporting auto parts of vehicles that are not manufactured in Pakistan, such as Mercedes, Ford Van, Morris and even the famous London taxi. To date only about 40 of the more than 500 registered auto parts vendors registered with manufacturers of international car brands have entered the exports arena. When the rest exploit the potential, as they are expected to do in the next couple of years, there may well be a major boom for the auto engineering industry. To a great extent the credit for the success of the auto parts industry goes to the vendor development programs organized by the domestic auto industry, whose mainstay is technology transfer.

In areas of human resource development, certain auto manufacturers are sponsoring technical education programs on national level to produce skilled and literate workforce for the auto sector. Not only does this voluntary initiative groom able individuals to serve the economy on macro-level, the auto sector also provides instant employment to these individuals.

In spite of all these positive measures taken by the auto sector, it appears that a certain lobby is keen to bring re-conditioned cars back into the market to serve their own personal interests. However, it is time that we should sit back and analyze the kind of people who are so desperate to get the current auto policy status quo changed. The question that arises is that whether their primary objective is to make cheaper cars available to the public? Or is it a convenient excuse to hide a multitude of less than ethical business practices that are not in the interests of either government or consumer?

Sadly enough, no matter what their purpose may be, this lobby refuses to acknowledge the new customer-friendly policies introduced by major automobile manufacturers. These policies have resulted in bringing about a sea of change in the automobile market, according to both industry insiders as well as formerly hard-pressed customers.

The market has now seen the end of long waits for delivery, premiums paid to investors and the trade for immediate delivery and having to pay the full price of the vehicle in advance. What's more, even the auto dealers appear to be happy with the new policy. The auto sector is currently facing fast paced growth. With increased deliveries, reduced premiums and prompt deliveries, almost every one seems happy and content with the way our auto industry is operating.

The only ones who still remain unhappy with the flourishing state of affairs are the investors or middlemen who had vested interests and relied on a shortage of vehicles to achieve their questionable ends. With increased volumes and faster availability, genuine buyers no longer need to pay premium prices they once used to extort to guarantee immediate delivery.

Despite the introduction of a consumer-friendly policy, a series of baseless allegations with personal attacks on Pakistan's auto industry and the auto assemblers for fleecing money continue to be asserted. Groups that should have been supportive to the auto sector are making adverse efforts to paralyze the industry, while expecting an unrealistic overnight indigenization. The level of indigenization should be judged on the basis that within the last 10 years, Pakistan stands at par with any other developing country that enjoys a healthy automobile industry. It is time critics and other self-centered factions realize the significance of the auto industry by virtue of its contributions towards the prosperity of Pakistan, and at the same time, acknowledge its success in fulfilling its commitments to the consumers, in terms of quality, service, value and delivery.