AUTO INDUSTRY

Accelerating increase in production by auto manufacturers

By TALHA BIN HISAAM
 Apr 04 - 10, 2005

The demand of automobiles in Pakistan has increased manifold in the last 3 to 4 years due to good macroeconomic management and availability of cheap auto financing. The major thrust of this demand has been in the 1300 cc to 1600 cc segment. To keep up with this demand the main car manufacturers in this segment who have 90% of the market share, i.e. Indus Motor Company and Honda Atlas Cars have embarked on an aggressive capacity/production enhancement strategy. The graph below shows the increase in production of these two car manufacturers.

PRODUCTION INCREASE

The production by Indus Motor Company, the manufacturer of Toyota vehicles in Pakistan, in the last 9 years has increased by more than 5 times. Production of Toyota Corolla the market leader in this segment has increased from 5,000 units in 1996-97 to 21,000 units (projected) in 2004-05. Honda Atlas has also increased its production from around 4,000 units in 1996-97 to 13,000 units in 2004-05 (projected), an increase of nearly 3 times higher.

Here it will be pertinent to stress that the prevalence of premiums despite the production increase is due to non-genuine buyers. It should be noted that Indus Motor, Honda Atlas and other car manufacturers have nothing to do with these investors and roadside car dealers who have vested interests and are bent upon destroying the local automobile industry by lobbying for uncontrolled import of used cars. These private individuals and roadside showroom owners are acting on their own. These investors have booked more than one car for sale at premium prices to customers who are not willing to wait for delivery of their cars.

Company sources reveal that Indus Motor Company has taken the initiative and chalked out an anti-premium strategy. The salient features of this strategy are:

1. Continuous increase of production:

13,000 cars/year (2001-02) a 37,000 cars/year (2004-05) as shown in chart/graph.

2. Delivery month informed to customer up front, agreed and signed by customer at the time of booking at authorized dealerships

3. Detailed scrutiny of PBO (Provisional Booking Order) customer details and copies of NIC

4. Only one vehicle against one NIC

5. Only new NIC is accepted

6. NTN number, bills, etc to match NIC address as secondary evidence

7. Compulsory registration in the name of NIC holder

8. Payment draft must carry name of NIC holder

9. Mystery buyer surveys

Other car manufacturers should also follow suit and take steps to curtail the menace of premiums.

With the continuous increase in production by car manufacturers, import of used and new cars; 8000 Mitsubishi cars by Dewan Motors, in addition to 5000 used cars expected in the next months, the gap between and supply and demand of cars will reduce which will cut down delivery periods leading to elimination of premiums.

The car manufacturers, Government of Pakistan and the consumers are all stakeholders of the automobile industry of Pakistan as it is a major source of revenue, employment, investment, import substitution and technology transfer. The need is for all the stakeholders to realize their responsibility and fulfill it. The car manufacturers on their part should make further expansion in capacities.

The government should provide a conducive business environment and long-term stable policies, and the consumers should insist on buying cars only at the official retail sales prices announced by the manufacturers. If all stakeholders make a concerted effort there is no reason why locally manufactured cars matching global quality standards cannot be available to consumers at competitive prices without long delivery periods.