AUTO PERFORMANCE NOT INDICATIVE OF RECOVERY
Nov 15 - 21, 2010
Measuring economic growth in terms of cars produced and sold is as foolish as advising poor masses to eat cake when there is no bread! Car sales went up during Jul-Oct 2010, and also during October as compared to last month. This happened in the wake of devastating floods and the resultant loss to the economy, especially agriculture. Should we take it as a sign of economic recovery?
1300 cc car sales went up from 4724 units in September 2010 to 5577 units in October, recording an increase of 18 per cent. This shows that the 'haves' have brushed aside the impact of floods and have resumed their journey on the road to material bliss. 1000cc and less car sales have gone up from 11386 units in September 2010 to 12013 units in October, registering an increase of 5.5 per cent. The poor and hazardous public transport system has forced the middle class and lower middle class people to own personal means of transport, the former opting for small cars and the latter for motorcycles. In many cases, this has been achieved by applying cuts to other necessary expenditure. Owning a car is the exclusive domain of 'haves' and trying to step into their domain can be a risky proposition for the middle class people. The ever-rising cost of fuels will ultimately force them to a sell-off and return to public transport. Moreover, the continuously rising car prices are also there to check their march into that 'exclusive' domain.
PRODUCTION (P) AND SALES (S)
VEHICLE LAST 15 YEARS 15-YEAR AVERAGE FY-10 JUL-SEP FY-11 Total Cars P 1292609 86174 121647 31713 S 1181899 78793 123957 30030 Trucks P 39272 2618 3425 800 S 31894 2126 3620 725 Buses P 15209 1014 628 133 S 13614 908 657 133 Jeeps/LCVs P 17957 1197 1172 228 S 14435 962 1201 110 Pick-ups P 155682 10379 15768 4167 S 143458 9564 16496 3477 Farm Tractors P 540319 36021 71607 14431 S 499967 33331 71512 13931 Motor Cycles
P 4392355 292824 736861 188418 S 4187814 279188 737759 188140 Source: PAMA
What and how much to produce depends in a particular economy on consumption level, economic development goals, resource base, level of capital formation, production capacities, export market for any surpluses and socioeconomic constraints, if any. In the case of Pakistan's automobile industry, the consumption level is a function of economic growth, population and family income. The country has a negligible size of export market due mainly to the lack of competitive edge. Resource base is quite strong but lack of attention to economic issues has left it under exploited. The production capacity, though suffering from inadequate capital formation and dependence on imported parts and components, is quite sufficient, thanks to the investment made in the industry during boom period.
Being a developing economy, Pakistan's economic goals warrant a sustainable growth of this industry with more emphasis on segments related to industrial and agricultural development.
The statistics on segment-wise growth of the industry reveals a great deal about the growth pattern and its relationship with the country's economic development. Cars production in FY10 shows an increase of 41 per cent over the last 15-year average. On the same scale, an increase of 152 per cent in the production of motorcycles depicts a high growth pattern and suggests peoples' marked shift from reliance on public sector transport to dependence on their personal transport. A drop of 38 per cent in the production of buses confirms that view. A sudden upsurge in the production of personal transport vehicles shows that people have somehow managed to strike a trade-off between their transport needs and other basic necessity expenses which by itself is a cruel proposition given the high- inflation era we are living in. This is not a positive development as it betrays peoples' mistrust of their rulers who are supposed to take good care of their transport needs by providing them a cheap, efficient, and hassle-free transport system. They have already shown their doubt of government's ability to protect their life and property by putting reliance on personal means of security. These developments are quite serious and can potentially harm the restoration of democracy process. Moreover, the ever-growing number of personal transport vehicles creates a number of social and economic problems, the wasteful use of energy being the most serious of them.
Trucks are the backbone of logistic system and take important part in the transportation and distribution of agricultural produce and industrial goods. Sustained growth in this segment is indicative of an overall and balanced economic growth. On the given scale, a meager growth of 31 per cent in the production of trucks shows the inadequacy and vulnerability of our logistic system. In India, more than 400,000 trucks are produced every year as against a few thousands produced in Pakistan. An increase of almost 100 per cent in the production of tractors is perhaps the only face-saving aspect of the so-called improvement in the LSM sector. We need to keep up this trend to support farm mechanisation for an improved per-hectare yield. However, the Jul-Sep 2010 figures suggest that, on an annualised basis, the production of farm tractors would record a negative growth of 19 per cent.
The growth of the different segments of auto industry is quite lopsided. With the increase in population and as a result of mafia-based operation, the public transport sector has gone into disarray. Shortage of vehicles, lack of proper infrastructure, absence of any workable mass transit system have raised the demand for cars and motorcycles to a high level. Majority of small car owners have either resorted to bank borrowing to solve the top priority problem ñ transport ñ or made compromise with other basic needs. The other segments - tractors, trucks, LCVs and buses - have not responded in line with the car and motorcycle segments. Auto industry's growth is not representative of the overall industrial growth and, therefore, not reflective of national economic status.