AUTOMOTIVE SECTOR REGISTERS IMPRESSIVE GROWTH

KANWAL SALEEM, Lahore
Oct 01 - 07, 2007

Pakistan's automotive sector has recorded impressive growth over the last few years particularly in the car segment. The auto industry's share in total manufacturing sector in 2005-06 was 16 percent as compared to 6.7 percent during 2001-02. This rapid growth has been triggered by high economic growth, increased purchasing power of consumers and availability and financial options.

Economic survey of Pakistan depicts that the overall growth in automobile sector was 29.76% while basic metal industry grew by 58.6% during 2005-06. Pakistan will be producing 0.5 million cars by 2010 and around one million motorcycles. The growth in domestic appliance manufacturing is also encouraging. These growth targets would expand and demand of CNC Machine Tools Assembly manifold. Only production of 0.5 million cars require machining of 65, 000 tons of ferrous castings, 15, 000 tons of forging, 40,000 tons of aluminum casting, production of 60, 000 tons of plastic and 32,000 tons of rubber parts. By the year 2010 CNC machine Tools population requirements would increase to 152,460 as compared to current 9413. Machinery imports contributed 15.0 percent to the additional increase in imports and 6.5 percentage points to the overall growth in imports. Major contributors in machinery imports are power generation machine, agriculture machinery, construction and mining machinery, and other machinery, sources in the Engineering Development Board (EDB) told PAGE.

They said the growth in Pakistan 's domestic engineering sector has propelled the growth momentum of several engineering goods sub sector. In particular, auto sector of the country has shown unprecedented growth during last few years.

Sources in the Ministry of Industries told this scribe that the present government attaches great importance to the growth and development of automobile industry as it is a key driver of economic growth and technology transfer and a creator of jobs.

"We have seen tremendous growth in automobile industry in Pakistan due to private sector investment facilitated by supportive policies of our government. The increased demand of automobile products has resulted in significant new investment in assembly plants, new brands launch and remarkable growth of vendor industry'', the sources said.

According to them, the government expects the auto industry to position itself to become regional hub and a part of global supply chain by enhancing exports to the countries of the region. The objective of the auto policy is to generate value creation in the automotive sector through provision of short to long term policy framework in order to maximize benefits in terms of employment creation, contribution to GDP, enhanced exports and at the same time benefiting the consumer. The policy would hopefully ensure sustainability of local manufacturing through regulation of import policy of used vehicles so as not to impede the growth of the local industry while protecting consumer rights.

The sources said the government was extending support for the development of domestic automotive sector through initiating comprehensive support programmes and initiatives. The government will also extend support for technology acquisition, human resource development, cluster and integration of international best practices for strengthening backward and forward linkages. These linkages will facilitate domestic industry in adopting best practice management, processes and procedures to deliver higher quality standards that are necessary in assessing international markets.

PAK SUZUKI: Pak Suzuki is one of the leading manufacturers of cars and light vehicles in the country. Pak Suzuki's plant producing various products under the supervision of dedicated engineers and trained workers on modern equipment and machinery. Pak Suzuki has made substantial investments as a manufacturer of cars and light vehicles in the country and will continue to make substantial investment in future also. The recent expansion at Pak Suzuki would hopefully make vehicles available at comparatively less price. Nevertheless, Pak Suzuki is a manifestation of how a strong micro economic environment converts the destiny of the company, its employees and shareholders and public at large.

Moreover, experts said the challenges posed by globalization, liberalization and increasing competition required a strategic direction and policy framework for sustainable growth of the domestic automobile sector. 'We have already switched over from deletion programmes to a transparent and competitive TBS environment- a paradigm shift in the auto industry, and have now come up with a clearly spelt out tariff policy for at least five years and a support programme for its safe transition through a long term auto policy', they said.

DELETION OF AUTO PARTS: The experts called upon the government to increase deletion of auto parts as auto assemblers having achieved localization of 60-70 percent components still pay higher amount on the balance 30-40 percent imported components. The deletion level in cars ranges from 50-70 percent. However, the cost of local components is much less than that of imported components of even those models where 70 percent deletion have been achieved.

PREMIUM ON CARS: Buyers of cars are critical of premium being charged on new cars. They called for taking steps to eliminate premiums in the auto industry, which upset people. Although, now the premiums are coming down, but the need is to put in place such a system which could eliminate this problem.

'The government decision to import three years old cars, instead of five years old, has not only led to an upsurge in premium of local cars but has also put on stake Rs 12 billion of dealers as between 3000-3500 vehicles are stuck up at Japanese ports', dealers said.

IMPORT OF VEHICLES DECLINES: Import of completely knocked-down (CKD) and semi knocked down (SKD) cars recorded a decline of 24.31 percent during 2006-07 over last year. The CBR statistics showed that CKD and SKD vehicles worth US $ 603.346 million were imported during the period under review as against US $ 797.153 million imported by the local automotive industry during the same period last year.