DEMAND FOR LOCALLY MANUFACTURED CARS ON RISE

Consumers are still continuing to favour locally assembled cars despite the increase of imported new and reconditioned cars.

BY SABEEN IBRAHIM
Feb 27 - Mar 05, 2006

With reference to the current economic scenario, the demand for locally manufactured cars is continually increasing. In light of the ever-increasing demand for locally manufactured cars, car production by local auto manufacturers and assemblers has increased by 29.3 percent, to 83,064 units in the July-January period of the fiscal year, compared with 64,203 units in the same period last year.

In recent years Pakistan has emerged as a growing player on this dynamic international stage as the demand for cars is projected to go beyond 250,000 vehicles in 2010. 125,000 new and used vehicles were brought into the country, while it's estimated that a further 30,000 cars are expected to enter Pakistan under various schemes. However, consumers are still continuing to favour locally assembled cars despite the increase of imported new and reconditioned cars.

Low interest rates are responsible for the surge in the consumer market as car leasing has become popular with the masses. Auto financing has also increased the demand for cars giving an unparalleled boost to the auto industry. Frequent model changes have been instigated by the furious competition in the automobile sector and the auto parts industry has invested billions of rupees in capacity expansion.

The increase in demand is well met by the auto industry and has proven advantageous towards the growth and development of the auto sector, in terms of technology transfer, quality maintenance as well as investment. The local automobile industry has been credited with making significant contributions to the growth of economy.

The total investment of the automobile industry is anticipated to grow to Rs. 93 billion by 2006. By the fiscal year 2010, the car manufacturing industry is projected to contribute Rs. 210 billion to the country's GDP. The revenue of the government from the industry is projected to increase to Rs. 70 billion. The enhanced activity will be at the cost of around Rs. 42.50 billion. There would be a number of jobs created throughout the industry, with a projected 12,500 direct employment in the industry. 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.

In addition to these benefits the increase in production will provide for import substitution of $3,425 million, which means a foreign exchange savings to the tune of $ 1,475 million.

Being in the stages of development, foreign investment is looked towards and relied upon to provide a boost to the economy. The industry employs engineers, diploma holders, technicians and highly skilled labor force. It has the potential to cater to the livelihood of three million people.

In terms of quality standards, cars made and assembled in Pakistan match any foreign standard. Production of the Toyota Corolla increased to 2891 units in December 2005, Mehran production rose to 3673 units and Suzuki Alto sales in December accumulated a total of 1645 units. Honda Atlas' Honda City production declined while the Honda Civic rose to 2,735 units.

Pakistani automotive industry's figures projected for 2010 presents a highly encouraging picture, while the growth pattern offers tremendous potential.

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

The new look, shape and quality of locally manufactured cars that meet international standards have proved to portray a positive image of the auto sector of Pakistan internationally for being technologically advanced.

The rising demand for vehicles in the Pakistani market and the industry's profitability is an excellent tool for the government to attract automobile manufacturers from around the world to set up their manufacturing units in Pakistan instead of allowing imports.

If the demand continues to increase as the trend shows, more investment is anticipated to be made in the auto sector, which is beneficial for the Pakistani economy.

Pakistan is said to be in the "pre-motorization" stage at the present time. As per capita income improves, further growth can be expected, but essential government support is needed to realize the potential. This requires continuation of favorable government policies towards the auto sector to encourage investment.

The advancement made by the automobile industry can be assessed by its impressive performance over the years. If further momentum is provided to the industry, with industry-friendly policies boasting a viable long-term view is put into place, the sector will grow at an even faster pace and play a vital role in the country's frontward economic thrust.

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