CURRENT SITUATION OF AUTOMOBILE INDUSTRY IN PAKISTAN
MOHAMMAD IRFAN SHAIKH
Director Sales & Marketing, Hinopak Motors Limited
Apr 27 - May 10, 2009
Established in 1986, Hinopak is a Japanese owned multinational company with majority shares with Hino Motors Japan (59%) and Toyota Tsusho Corporation, Japan (30%).
Backed by Hino's expertise, Hinopak has achieved standard of quality and excellence that rival the best in the region. The Company has been overall market leader in commercial vehicles for the last 23 years. With over 50,000 vehicles on road, Hinopak has gained over 65% market share, making it the largest manufacturer in medium & heavy-duty truck and bus industry in Pakistan.
The company is the first in the commercial vehicles sector to start the establishment of a 3S Dealers network, which offers Sales, Service and Spare Part facilities all under one roof. Our comprehensive network of offices, 3S Service Dealers and Spare Parts Dealers are strategically located throughout the country.
Hinopak has always manufactured and designed vehicles keeping in view the demands of the customers, recent development being the addition of two new Prime Movers to its existing range, Hino FG1J Prime Mover and Hino FM1J Prime Mover, thus providing a wide choice of Prime Movers to the market
Around the world, automobile assemblers are experiencing the worst of financial crisis, leading to recession. Similarly, since Pakistan' s automobile industry is an export driven industry attracting both local and foreign investments is currently experiencing declining sales and production volumes and shows a bleak future. Due to the present crunch in the industry, many companies are on the verge of bankruptcy.
Several factors could be attributed to the reduction of vehicle sales during 2008-2009. These include high interest rate, reluctance of financial institutions in extending credit for vehicle purchase, and sharp rise in cost of CKD kits etc. Similarly high rate of inflation in the country has greatly reduced purchasing power of people in general. The unexpected destabilization of economy compounded by political adventurism and the effect of global financial meltdown has combined to deliver a severe blow to our economy.
During 2008, Pakistani rupee showed a severe depreciation against major currencies, especially US dollar and Yen that appreciated by 28% and 58% respectively, adversely affecting the auto sector. The unexpected appreciation of yen resulted into rising cost of production for the auto assemblers in the country and stock pileup. However, Increase in selling prices was not sufficient to cover the hiked cost of production. The overall trucks & buses market showed a decline of 42% during 2008-2009, with total of 2626 units sold from July 08 to March 09.
The economic situation may well be seeing a turnaround in the country and we expect some big orders in the public and private sector including UTS Lahore, WASA, and Rescue tenders. Recently an order of 50 units of CNG buses from City District Government Karachi and 50 units of Hino Dutro trucks from City District Government Lahore have been awarded to us.
But still the overall auto industry slump recovery seems to be a long process due to various macro-economic factors, including tight liquidity, and lower credit availability, slower GDP growth rates and the current depressed consumer consumption.
We have also prepared a list of employees that should be forced to be released if situation worsens further. Though the challenge is serious, we are hopeful that this phase will be reduced with the passage of time. It is the responsibility of the economic masters to show professionalism and maturity during these hard times. The uplift of auto sector will also depend on the ability to develop and produce a wide range of superior quality vehicles for our markets, strong bond with major suppliers, reduction in production costs, and financial developments for capital investments.