Q&A WITH CHIEF OPERATING OFFICER DEWAN MOTORCYCLES

KHALIL AHMED
(feedback@pgeconomist.com)
Nov 15 - 21, 20
10

PAGE: TELL US SOMETHING ABOUT YOURSELF?

ANWAR IQBAL: I have been associated with automobile industry of Pakistan for last 18 years. I am playing a key role as pioneer by introducing low cost automobile/motorcycle for Pakistani market. Keeping in view the market demand, I have always focused on two-wheeler and three-wheeler automobile industry of Pakistan. I have been associated with some world famous auto brands like Fiat, Piaggio, Hyundai, and Faw in Pakistan. My role is to provide guidance derived from my extensive entrepreneurial expertise, commercial experience and product development skill as required to guarantee the project team that project shall achieve the preset goals within the given timeframe. Currently I am running my own company, Silver Seal International. Beside this, I am Chief Operating Officer in Dewan Motorcycles. Dewan Group is the producer of Star Motorcycles and Star Trucks in Pakistan. I have a proven track record with business acumen and P&L leadership skills, private, public, start-up and turnaround business environments. My business leadership skills have created a new horizon in two wheeler industry and its market in Pakistan. I introduced new products, brands and have created new market segments. With my innovative ideas, I fetch increased profitability to all stakeholders i.e. investors, share holders, vendors, and employees. My technical expertise are backed by my vast experience in industrial management in marketing, government relations, after sales service, product development, distribution network development, supply chain management and finance.

I started my professional career in 1982 and in the beginning of my career, I worked in various multinational companies like Esso Eastern Inc., Union Texas Inc., Bristol Mayer Squib and Singer Pakistan Ltd. My first Job was with American Oil giant Esso Eastern Inc., Pakistan.

I did my Master's in Economics and have also earned a degree in business and industrial management.

PAGE: TELL US SOMETHING ABOUT FINANCING BY BANKS FOR MOTORCYCLE SECTOR.

ANWAR IQBAL: When you ask about bank financing for motorcycle sector. It may be noted that motorcycle sector has three main stake holders:

a. Motorcycle assemblers / manufacturers.

b. Vendors who supply parts and components to motorcycle assembler / manufacturers.

c. Motorcycle customers/users.

In case of A&B i.e. assemblers and vendors, banks are financing in routine, in view of credit worthiness of the client on case to case basis.

As far as motorcycle customers / users are concerned, normally bank financing/ bank lease facilities are not available. The main reason is motorcycle user / customer belongs to lower income group and majority of them are illiterate. Therefore, this customer segment does not attract banks and leasing companies. However, every local motorcycle market has its own arrangements, for example, big dealers sell motorcycle on installment basis. Local financing arrangements are running very successfully. The bad debt ratio is also very low i.e. from 1 per cent to 1.5 per cent. The main reason is that dealer and customer both belong to same area and normally know each other very well. Customer cannot think about default due to pressure of local society. He has to face/interact with the same people on daily basis for his business, job and for social events.

PAGE: WHAT IS THE REASON BEHIND HIGH LEVEL OF SALES OF NON-JAPANESE MOTORCYCLES FOR LAST FEW YEARS?

ANWAR IQBAL: I always prefer / insist to call them Pakistani motorcycle (non-Japanese). More than 90 per cent parts and components of these brands are 100 per cent manufactured in Pakistan. Now I come to your question. There are five big reasons for the high level sales of Pakistani motorcycles.

1. Competitive in price
2. Good quality
3. Strong distribution network
4. Cheaper and affordable, even on, installment sale / purchase.
5. Better margins / profits for sales dealers.

The Pakistani brands are available around on a half price of their Japanese brands competitors. As far as quality is concerned, it is almost the same of Japanese brand. You can ask what is the gauge of quality. The main gauge is that most of the vendors are same / similar who are supplying parts to Japanese brands and Pakistani brands. They are producing parts on the same machines with same materials and with same production methods.

PAGE: WHAT IS YOUR OPINION ABOUT IMPORT AND EXPORT OF MOTORCYCLES TO AND FROM PAKISTAN?

ANWAR IQBAL: Your question has two parts i.e. import in Pakistan and export from Pakistan. First, let's talk about imports.

Motorcycle industry in Pakistan is highly tariff protected. If you want to import complete built up motorcycle in Pakistan (C.B.U), all local duties and taxes on motorcycle import are around 150 per cent so import of motorcycle is not viable in any case. This duty structure looks very good for the protection and development of local motorcycle industry. But this has a negative aspect also, due to no competition situation with foreign advance / developed technology. We are manufacturing motorcycle in Pakistan, which is based on the technology of 1950s. The scenario of world motorcycle industry has changed all over the world. The models which we are producing now, have been become obsolete all over the world.

Now let's talk about export: As I said earlier, our motorcycle models are out of date as per latest world standards so export potential of our motorcycle industry is not very bright. We are mostly manufacturing 70cc engine motorcycles which are not in production in rest of the world. The present world standard with reference to motorcycle model / engine power is at least 100cc and above. More over technology has also changed. Now, rest of the world is mostly producing carburetor less, direct injection engine motorcycles, which are efficient in fuel consumption and more in engine power / pick up. However, Pakistan is exporting motorcycles to Afghanistan and Bangladesh but the volume is not very high.

PAGE: WHAT ARE YOUR VIEWS ABOUT MOTORCYCLE SECTOR PERFORMANCE IN PAKISTAN?

ANWAR IQBAL: In view of sales volume, performance of motorcycle industry in Pakistan has been marvelous for last one decade. Ten years before, Pakistan was producing 900,000 to 10,00,000 motorcycles per annum. Now, last year reported figures of sales / production volume of 1.3 million motorcycles for the year July 2009 to June 2010. Mind it that these are reported figures. Actual figures may be more because these figures are reported by Pakistan Automotive manufacturers Association (Pama). Some of the big players of the Pakistani brands are still not the members of this association so their production figures are not accounted for. But as I said earlier Pakistani motorcycle industry lacks in technological development / advancement. We must acquire latest technology. By introducing new technology, we can help in saving our fuel import bill and can create a cleaner environment. It will also provide more efficient and cost effective transportation system to the user/masses.

PAGE: WHAT WOULD YOU SAY ABOUT TAXES AND DUTIES ON MOTORCYCLES?

ANWAR IQBAL: Presently taxes and duties for a manufacturer/assembler of motorcycle are around 60 per cent. It includes custom duties, regulatory duties, sales tax, income tax and insurance charges etc. Motorcycle is poor and middle class population's means of transportation. Furthermore, you know we don't have mass transit transportation system even in mega cities, like Karachi and Lahore. Masses need an affordable and cheap means of transportation. Motorcycle fulfills this need up to some extent so duties should be minimised on this product. Interestingly, in country bike is also used as taxi. People are used to travel on motorcycle by paying rent for reaching on main roads or to the nearest town from their villages. In view of all these aspects, duty structure should be reduced to provide relief to the poor and middle class. I assure you if government announces reduction in duty on motorcycle industry, the revenue of exchequer will increase because five million motorcycles can be easily sold in this market if price of bike is decreased by 10 to 15 per cent.

PAGE: WHAT IS THE FUTURE OF MOTORCYCLE INDUSTRY IN CURRENT SCENARIO OF SLOW GROWTH IN ECONOMY IN PAKISTAN?

ANWAR IQBAL: First of all, I pray that Pakistan must come out from the current economic turmoil. As far as motorcycle industry is concerned, motorcycle is entry level vehicle or the cheapest in vehicle and cheapest in price, also cheapest in use. This is because we don't have an efficient public road transportation system or railway system. Fuel prices are increasing day by day and whatever public transportation system exists, it becomes expensive and unaffordable for the masses. So future of motorcycle industry is very promising in Pakistan. I believe sales and production volume of motorcycle industry will touch the figure of five million in next five years Inshallah.