'VENDORS DEPEND ON IMPORTED RAW MATERIALS'
INTERVIEW WITH CHAIRMAN ASSOCIATION OF PAKISTAN MOTORCYCLE ASSEMBLERS
TARIQ AHMED SAEEDI (firstname.lastname@example.org)
Oct 20 - 26, 2008
During past few years annual production of motorcycles in Pakistan has recorded a phenomenal growth of cent percent. From 570,700 units in 2004-05 to 751,379 in 2005-06 to 839,850 in 2006-07 and to recent 1058000 in 2007-08, assembling of motorcycles per year has helped in developing price-competition amongst all sixty assemblers across Pakistan and benefited end consumers. This progress has not only given price relief with choices to bike riders but also prospered vending industry of the country. That whether is this a healthy sign for an economy like of Pakistan which is presently facing critical problem of containing spiralling trade deficit and exit of foreign reserves is a question attached with the proportional cost of import incurred on letting growth of motorcycle industry or the extent with which balance of trade gets disturbed.
Muhammad Sabir Shaikh, Chairman Association of Pakistan Motorcycle Assemblers says bike assemblers in Pakistan outsource 70 percent of components of a motorcycle from local vendors and 30 percent of mainly engine parts from outside the country. These local vendors depend on imported raw materials heavily causing outflow of foreign exchange, he splutters. Currency disparity is now making vendors expensive. Dollar appreciation against Pak rupee is too affecting greatly.
Heading also an assembling plant of Chinese motorcycle, Sabir Shaikh during an interview with PAGE says national motorcycle industry has reached to a stage where local unit becomes more cost effective than international one. However, complete manufacturing is not possible right now due to many reasons, he said. 'Firstly because of its hi-tech requirements for instance for manufacturing head cylinders and crank shafts it exacts heavy investment in the initial phase. Public-private partnership can become effective to finance indigenized manufacturing that can wean bike makers from imports of CKDs and CBUs'.
Entry of Chinese bikes introduced motorbikes at relatively lower prices and pushed downslide scooter prices of prime market players in local markets. Japanese makers hold major share in Pakistani motorcycle market. In contrast to usual practice, prices of motorcycles received significant cutback during last six years. The recent crises are again jacking up prices of Japanese and local bikes. Sabir Shaikh said in last three months almost fifteen motorcycle assemblers shut down their plants nationwide.
Out of sixty assemblers in the country, Honda, Suzuki, and Yamaha give largest units production per month, he said and added these big three assembled approximately 4,000 units per month while ten other unwound 1000 to 1500 bikes monthly, thirty 300 to 500, and remaining below 300. Honda captures highest share of around 40 percent and sold 453,000 bikes, while Yamaha 64,000 and Suzuki 34,000 during last fiscal according to the association estimate.
Brand consciousness of local bike riders assist Japanese assemblers in maintaining supremacy over local assemblers or Chinese parts bikes, he says. Above all, 'we are at introductory stage and have penetrated only across 100 localities in last five or six years, whereas Japanese has decade-old grips in Pakistan. We are yet to enter in to 90 untapped markets mostly comprising of interiorsm'. "With an addition of nominal cost, we can bring quality of Chinese motorcycles at par with Japanese", he replied when asked about difference of quality between two made. "There are other nations such as Thailand from where we can import better quality engine parts," he added.
On one hand gradual increase in prices of local and international motorcycles entwined consumers with worries and spike in price of petrol, which is a prime fuel for bike, worsened these concerns on the other. Increasing cost of production and rising ecological obligations forced assemblers to soar motorcycle prices. Standard of controlling environment pollution Euro II engine has compounded cost of making bike. Right now, not all bikes are loaded with such engines. But, Atlas Honda has inducted Euro II in CD-100 and Chinese makers in 125cc bike.
Sabir Shaikh says Chinese investors have showed their keen interest to invest in manufacturing of motorcycles in Pakistan. 'I can solicit foreign investors.' In particular businesspersons from China are serious to set up bike manufacturing plants in the country and ready to transfer technology, adds Shaikh. 'Unfortunately, bureaucratic hurdles engrained here make them change their moods.' Recalling discontented Chinese business delegation tour to Pakistan, he said, vice presidents from Lincon, Chinese supplier of 650cc BMW engine, returned back to their home country without having reached to any concrete agreement their visit was preordained after getting disappointed. Lack of coordination and hectic government procedures often jeopardize what is otherwise convinced accords.
"Neither we are provided with industrial lands on concessionary or preferential conditions nor are we (investors) facilitated or motivated," he dismayed. Infrastructure for vending industry should be improved. Manufacturing zones with easy accessibility for employees should be established. Dominant certain groups, what he terms, 'Mafia' are not happy with Chinese entry and also putting a stymie into further investment perhaps to monopolize market shares.
If government addresses to this matter motorcycle industry of Pakistan can become self sufficient and export oriented. Transferring responsibility to independent authority from government would not produce desirable outcomes, he said with reference to establishing of auto clusters by making land distribution through private companies. He was not sure about the effectiveness of auto industry development plan envisaged to enhance share of auto industry in GDP.
Monotony in bike designs is an alarming situation, he says and adding research and development increases numbers of innovation, which in case of motorcycles, has stagnated to three or four models in Pakistan. Self sustainability and industry's contribution to GDP can not be increased until investment in R&D, he concludes.