AUTO INDUSTRY

Performance and Potential

By TALHA BIN HISAAM
Nov 01 - 07, 2004

The automobile industry in global terms is considered the mother of all industries. Among the world's five largest companies, three are in the automobile sector.

The manufacturing of cars requires utilization of a wide range of production technologies such as casting, forging, machining stamping, rubber, plastics, high-end textiles, etc. It is not possible for a car manufacturer to make all the parts in-house and be competitive at the same time. Therefore, specialist manufacturer in respective fields are required to work closely with the automobile manufacturer to provide the end-consumer with a cost-effective product.

When Pak Suzuki Motor Company commenced operations in Pakistan, a similar pattern evolved in the country. The vending base grew at a rapid pace and some 850 units were established over the past two decades to make parts for vehicles that were duly modified to suit our climatic and road conditions.

The progress made by the Pakistan automobile industry can gauged by its impressive performance over the past years and this is just the beginning. If further impetus is provided to the industry and industry-friendly policies are put in place with a long-term view, the sector will grow at an even faster pace and play a vital role in the country's forward economic thrust.

The Pakistan auto industry's progress chart until June 2004 presents a highly encouraging picture. When its future progress is viewed in light of figures projected for 2010, the growth pattern offers tremendous potential.

FINANCIAL FIGURES, JUNE 2004

Description

Cars
120,000

Motor Cycle
400,000

Tractors
26,000

Vendors

Industry

Contribution
to GDP

84.00
Billion

30.00
Billion

15.08
Billion

24.81
Billion

153.89
Billion

Revenue to
GOP

28.00
Billion

11.00
Billion

4.50
Billion

8.00
Billion

51.50
Billion

Employment

5,000

3,500

2,000

160,000

170,500

Investment

17.00
Billion

5.50
Billion

3.50
Billion

72.00 Billion

98.00 Billion

Import Substitution

US $1.37
Billion

US $0.278
Billion

US $0.38
Billion

US $0.37
Billion

US $24
Billion

Foreign Exchange Saving

US $0.59
Billion

US $0.17
Billion

US $0.29
Billion

US $0.19
Billion

US $1.25
Billion

PROJECTED FINANCIAL FIGURES, JUNE 2010

Description

Cars
320,000

Motor Cycle
1,000,000

Tractors
40,000

Vendors

Industry

Contribution
to GDP

210.00
Billion

75.00
Billion

23.08
Billion

60.81
Billion

368.89
Billion

Revenue to
GOP

70.00
Billion

25.00
Billion

7.00
Billion

19.00
Billion

121.50
Billion

Employment

12,500

8,500

3,100

265,000

290,000

Investment

42.50
Billion

13.75
Billion

5.50
Billion

171.00
Billion

233.00
Billion

Import
Substitution

US $3,425
Billion

US $0.695
Billion

US $0.585
Billion

US $0.90
Billion

US $5.605
Billion

Foreign
Exchange Saving

US $1.475
Billion

US $0.425
Billion

US $0.457
Billion

US $0.471
Billion

US $2.830
Billion

The performance of the industry has been phenomenal in recent years and it has contributed tremendously in the following areas:

ECONOMY & INVESTMENT OPPORTUNITIES

Pakistan automobile industry has the credit of making a significant contribution to the growth of economy. The total investment of the automobile industry is estimated to have reached Rs.52 billion and is expected to grow to Rs. 93 billion by 2006.

EMPLOYMENT

Its strategic importance raises no question, as it is the sole provider of employment to 10,000 people and to 100,000 people in vendor industry and extending over 350,000 jobs in coming 3-5 years. For a country like Pakistan where there is high rate of unemployment and high crime rate such industries serve as saviors creating mass employment rate.

RECORD QUALITY PRODUCTION

In terms of quality standards, cars made and assembled in Pakistan match any foreign standard.

It was the result of consistent government auto policies during the last three years that spurred market growth. Indus Motor with an installed capacity of 26,000 units, had an increased production of over 38,650 in 2002-03 and was projected to reach 50,000 units by end of 2004.

Several new models equipped with all new state-of-the-art technology to meet the world class had been launched by different local automobile manufacturers towards fulfilling the consumers' demand.

New vehicles launched during 2003-04 include:

•New Model of Honda Civic
•New Model of Suzuki Mehran
•US 4x4 wheeler, Land Rover
•Hino's new CNG bus
•(Zabardast Jeep & Truck) by Adam Motors
•BMW series by Dewan Farooq Motors
•Mitsuibishi series by Dewan Mushtaq Motors
•Automatic & CNG fitted Daihatsu Cuore, by Indus Motors

Being in the stages of development, foreign investment looked towards and relied upon for a boost in the economy. The industry employs engineers, diploma holders, technicians and a highly skilled labour force. It has the potential to cater to the livelihood of three million people. The question that needs to be asked is whether we need to create employment and investment opportunities in Pakistan or abroad?