Growing Production Catching up the Demand

Mar 20 - 26, 2006

On the back of a strong industrial and engineering base and in the face of a huge market appetite the enormous economic potentials of the automobile industry is lending a positive support for an economic turnaround to the country. However, to ensure a sustainable growth in future, the auto industry deserves a long term, consistent, and clear policies to attract investment and expansion to the desired level.

Pervez Ghias, CEO of Indus Motors, while discussing current market scenario in Pakistan at a Press Briefing last week, made these observations.

Though he did not oppose of the import of the used cars in absolute terms, yet indicated the negative and adverse impact of what can be described the policy of allowing the used cars to creep into the local market.

In fact, it is the roadside side industry led by the dealers who were stealing the benefits of the policy of used cars. The used cars mushrooming at the roadside showrooms are enough to tell the truth of the story. On one hand it may harm growth momentum of the local auto industry which is visibly poised to catch up the demand while it is encouraging the flight of capital at a massive scale at the cost of the local industry.

One of the remedial steps to check under-invoicing and other trade ills is the proposed Tariff Based System (TSB) which should be implemented at the earliest.

The automobile industry, Vendors, Engineering Development Board (EDB) and the CBR have reached a consensus over immediate implementation of TSB collectively finalized by all the stakeholders which should be complaint to WTO and of course to the national interest.

Discussing Motorization potential in Pakistan, Pervez Ghais while referring to a study said that Pakistan comes at the bottom line as compared to other countries.

Actually Pakistan was in the pre-motorization stage because at present the number of cars per 100 persons comes to merely 8 in Pakistan as compared to 10 in China, 12 India, 21 Indonesia, 23 Iran and 31 Sri Lana while 764 in the US. This leaves a huge space for investment as the market appetite continues to grow in Pakistan.

Although he considers the condition of NTN number of all the buyers to avoid the role of the middleman who is making profits by making investments. The requirement of NTN may prove counter productive in the sense that it provides a cover to the premium mongers. Since the size of the informal economy is much bigger that the documented one in Pakistan, the auto industry is losing the potential buyers, as most of the people do not have the NTN but they are the genuine buyers. In the absence of NTN, the potential buyers have no alternative but to buy a car through investors by paying premium to the middleman.

He strongly recommended that all dealers, including roadside dealers should be sales tax and income tax registered and all transactions should be documented.

Pervez Ghias however agreed that stable political conditions, improved international standing, economic growth and increase in auto financing in Pakistan altogether have helped the auto industry in general and Indus Motors in particular to enhance production from 2930 units in 1993 to 50,000 in 2005-06.

Regarding Indus Motors vision, he said his company would love to be the most respected corporate entity with its motto of satisfying the customers with a wide range of quality products and solutions in the automobile industry with the best people and best technology.

Indus Motors making constant efforts to optimize available resources, which reflects in its increased volume of production from 57 cars per day to 144 to 180 in November 2005.

Indus Motors is eyeing for 200 units per day by May 2006 the target are very much visible, he said with a sense of confidence. He said that the company has maintained price level despite increasing costs, delivery month informed to customers up front, agreed and signed by customers at the time of booking and payment of interest for any time delayed.

On its part, the Indus Motors has taken protective measures to safeguard the interest of the genuine buyers and to discourage resellers by conducting detailed scrutiny of customer details and NIC, issuance of only one vehicle against one NIC, acceptance of only computerized NIC, NTN, NIC holders name on payment draft and mystery buyers surveys.

Pervez Ghias was of the opinion that import of used cars would not serve the purpose of in the long term and sounded a note of warning that the government should foresee the consequences of the policy of importing used cars it is serving the interest of the dealers rather than overseas Pakistanis.

Discussing the adverse impact of the influx of the used cars in the local market, he reiterated that besides rampant massive under-invoicing and flight of capital it causing huge losses to government revenues because the used cars dealers are not Sales Tax registered, and were engaged in non-documented transactions.

Besides revenue losses, the imported vehicles were not compatible to whether and the road conditions while their parts and service backup facility was also not available which may lead the customers to an unhappy situation at the end of the day.

The supply of cars in the country is gradually overcoming the gap between demand and supply gap with overall growth in volume of production which may hit the level of over 200,000 at the end of the current financial year. The manufacturers and vendors are continuing to increase capacity to meet shortfall.

As a result of reduction in duty, the local market and roads were flooded by new and used cars and the six of the influx is increasing dramatically which would ultimately affect the spirit and momentum of the manufacturing and the down stream vendor industry in Pakistan.

Shah Saad Hussain, Director corporate and customer relations speaking on the occasion said in 2005 auto sector investment in the country that estimated at Rs103 billion while it projected at Rs500 billion in 2020. The revenue received by government in 2005 was estimated at Rs40 billion, which may go up by Rs200 billion in 2010 and projected at Rs250 billion in 2020.

He agreed that after textile, it is the auto industry, which can play a much greater role in building up the economy and the image of the country, provided it was taken care of by the policy makers, he expressed the hope.

Pervez Ghias, CEO and Shah Saad Hussain, Director Corporate of Indus Motor at the press briefing.