Oct 01 - 07, 2007

Globally, the automobile industry forms the largest proportion in world trade. Pakistan's auto-industry is contributing immensely and tremendously in making Pakistan a progressive competitive entity in the world. The development of auto-industry is the collective effort of many intelligent and research minded people of the world.

At the very first instance, the invention of tyre in 1889 by Dunlop (British), brought a great revolution in wheels movement. This indispensable invention triggered a great achievement that marked the beginning of a new era of rapid human advancement. Before this invention, the rubber was invented by Goodyear (Scotish) in 184

1, which was used in the manufacture of tyres. Some past historian argued that the credit for the first revolution goes to Karl

Benz, a German mechanical engineer, who designed and in 1885 created the world's first practical automobile powered by an internal combustion engine.

At the turn of the century, Henry Ford an American managed to improve the assembly line for automobile manufacturing with the introduction of the Model-T, installed the world's first conveyor belt assembly line in this Ford factory in Ford's Highland Park, Michigan (USA), invented a logical transmission mechanism, and convinced the steam-powered world that gas-powered automobiles were our best option. In the end, one could conclude that the present automobile was not developed or designed by a single producer or maker; instead it has been an on-going process that has taken over a century of devotion and competition that has driven us to the present day technological model of excellence and marvel of human and great scientific achievement.

The automobile and allied products sector in Pakistan has attained a vantage position aided by an unprecedented growth in the country's industrialization and urbanization. The Government's continued support to the automobile and auto parts manufacturing sectors has been the key source of encouragement to the manufactures as well as after market vendors to move in and reap entrenched benefits that Pakistan has to offer. The increasing number of banks and financial institutions in the country has greatly led to affordability, consequently turning out advantageous for automobile and allied parts manufactures. The declining interest rates and increased auto-financing through private banks, leasing companies and Mudarabas have played a vital role to raise up the sales like never before. In turn, easy and quick financing has helped to enhance rapidly and the overall auto production as it makes up a sizeable part of the total auto sales presently. Due to increased power of purchase of the costumers throughout the country and owing to the readily available financing and attractive leasing schemes by financial institutions and despite the price elasticity and intensifying competition, the industry players are enjoying very healthy profit margins on their automobiles. Recent survey has revealed that more than 75 per cent of all new automobiles are being paid for through financing and leasing options.

According to the latest economic survey in the country, there are presently nearly 65 automobile manufacturing units in the country which are greatly involved in the assembling and manufacturing business with the support of downstream industry, which comprises approximately 1.000 units of auto parts manufactures. Pakistan has registered a record 58 per cent growth in auto sector, which speaks for the country's tremendous industrial growth and its investment-friendly environment.

History of the auto industry in Pakistan is as old as the creation of the country itself. The initial work of automobile assembly in the country was started in early 1950 with Bed Ford Truck followed by Ford Perfect , Ford Cortina and Dodge Dart. Similarly, the second phase of automobile assembly was started in 1980 with the action of FX 800 CC Suzuki Car. In the year 1989, the Pak Suzuki changed the model of FX 800 CC with Mehran 800 CC. This company thereafter in 1992 introduced Khyber 1000 CC and 1300 CC Margalla. In 1993, a renowned Motor Company in Karachi, introduced Toyota Corolla and Daihatsu, and later on the Hondas Atlas LTD, Lahore in 1994 introduced Honda Civic having 1300 CC engine capacity. The three famous companies in the country, introduced smaller cars i.e. Cuore, Cultus and Santro of engine capacities 850 CC, 1000 CC, respectively, in 2000. This was known as an era of competitiveness. These manufacturers mostly met the market demands and successfully introduced many locally produced cars to cater to the needs of various consumer segments in the country. Two years back, the total car production increased 28 per cent to 126,403 during the year 2004-05 compared to 98. 461 units locally manufactured or assembled in 2003-04. The total production capacity of the local assemblers crossed 225,000 units in 2006, which reached 275, 000 units in 2007.

According to the data of Pakistan Automobiles Manufacturers Association , on a month basis , car sales during 2005 soared by 6.5 per cent to 13,668 units, while car production during the year went up by 7.5 per cent to 13,775 units. Indus Motor's 2004-05 sales soared by 20 per cent to 34,983 units compared to 29,113 units during 2003-04. Pak Suzuk's sales during 2004-05 stood at 75,720 units compared to 57,559 units previously This represents a growth of 32 per cent. Sales of Alto, Cultus and Baleno portrayed robust growth of 60 per cent , 45 per cent and 45 per cent, respectively. It may be mentioned that Pak. Suzuki has recently increased its production capacity to 150,000 units/pa and has plans up a new plant with a capacity n of 100,000 units by 2010. Dewan Farooq Motors sold 15999 units up by 33 per cent in comparison with sales of 12,031 units during 2003-04.

Pakistan has one of the lowest number of vehicles per capita among the developing countries which is around 8 cars per 1000 people and therefore offers a lot of room for demand growth. In India, China and Indonesia, this ratio stands at 12, 10 and 21 cars per 1,000 persons, respectively. In order to reach motorization levels equivalent to those of other countries in the region, Pakistan needs to cross the 500,000 units per annum threshold, provided if a long term policy supporting local assemblers and vendors is brought into effect immediately.

Import of used cars: The government's decision to liberalize imports of used vehicles in the Federal Budget of 2005-06 through relaxtion in the conditions for import, coupled with further reductions in custom duty, increased CBU imports dramatically to 46,275 units for FY06, up 63.9% over FY05. An additional 13,166 units have been imported by December 2006, creating pressure on the sale of locally manufactured models. In some cases, for e.g the Vitz. a popular model being imported into the country, the cars are coming back for resale on account of high maintenance costs and non-availability of parts. Issues such as the lack of factory fitted CNG kits and the ground clearance essential of our roads have rapidly decreased the resale value of these cars as well as costumers satisfaction.

According to industry analysts the number of imported cars will rise in 2007. Already, the first seven months (July 06 to Jan 07) of the current fiscal year FY07 has been 14,715 cars imported, a 66% increase when compared with the 8,852 cars in the respective period last year; a dangerous trend if not arrested. The import of used cars also directly affect the local vendor industry. Currently, a variety of different makes and models of used and reconditioned cars with eye catching colors are rolling everywhere on the roads whether it is Karachi, Lahore, Islamabad or other urban and even in villages and rural areas of the country.

Changing models, improving fuel efficiency , cutting costs and enhancing users comfort without comprising quality are the most important challenges of the automobile industry in the face of a fast globalization. The prices of the locally manufactured vehicles are generally less than the landed cost of imported vehicles, That is one of the major reasons why auto industry in Pakistan has not been able to make a breakthrough in the foreign markets. The country's automobiles industry presently manufacturing varieties of auto parts such as automobile engines., automobile frames and parts, brakes, die and jig fixtures, engine fitting, engine parts, garage and service equipments, pneumatic tires and tubes, power trains, rubber and plastic components for automobiles , steering and other spares parts. The local auto manufacturing industry provides employment in addition to investment, technology transfer, localization of parts and human resource development. The auto industry is the mother of the growing engineering industry with over 500 vendors and millions direct technical jobs, and around billion rupees in duties and revenues that the government itself collects every year from this sector. Additionally, a locally manufactured car has the added advantage and benefit of after sales service, easy availability of spare parts, low maintenance costs and much higher resale value. On the whole, the long-term auto policy would provide the investors predictable and transparent environment and would facilitate long-term investment , encourage growth and competition , enhance competitiveness and stimulate innovation.