AUTOMOBILE INDUSTRY OF PAKISTAN
DR.S.M ALAM & DR. M.A KHAN
Jan 25 - 31, 2010
Automobile and allied has attained a pivotal position in the country supported by unprecedented growth in the industrialization.
The government's continued support to the automobile and auto parts manufacturing sector has been the key source of encouragement to the manufactures as well as after market vendors to move in and expand their businesses.
Automobile sales were mainly driven by easy access to auto finance. Around 70% of the total sales were through auto finance lease. The increasing number of banks in public and private sectors and financial institutions has boosted purchasing affordability, and consequently turning out benefits to auto and allied parts manufactures.
Financing has helped to enhance the overall auto production as it still makes up a sizeable part of the total auto sales. Due to increased purchasing power of the customers throughout the country and due 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 automobiles.
In Karachi nearly 540 cars are coming on the road daily. In spite of this, 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, Indonesia, and Malaysia this stands at 12, 10, 21, and 32 cars per 1,000, respectively.
Pakistan's auto industry has negligible export potential. The high production cost, lack of modern technology, the tariff structure for imported units and manufacturer's greed for higher profits renders the indigenous production saleable only in the domestic market. China exports about 40% of its bike and Thailand exports about 28%. India produces about 7.7 million motor bikes annually and exports nearly 7%.
Pakistan produces about 750,000 units of motor cycles annually and is able to export negligible percentage. The country's share in the $600 billion world auto market is only $50 million.
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 midst of fast globalization. The prices of the locally manufactured vehicles are generally less than the landed cost of imported vehicles.
Automobile industry manufactures varieties of auto parts such as engines, automobile frames and parts, brakes, die and jig fixtures, engine parts, garage and service equipments, tires and tubes, rubber and plastic components, 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.
Auto industry is the mother of the growing engineering industry with over 500 vendors and millions of direct technical jobs, and around billion rupees tax contribution.
Local auto manufacturing industry provides employment in addition to investment, technology transfer, localization of parts and human resource development.
Additionally, a locally manufactured car has the added advantage and benefit of after sales service, and easy availability of spare parts.
The import of used cars for the year 2006-07 was 35,721 units, while for the year 2005-06 it was 54,618. 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. There is a great need to improve the auto manufacturing for the sake of the middle class car purchasers and to other needy persons at reasonable prices in the country.