HISTORY OF CHINESE BIKE MAKING IN PAKISTAN

MUHAMMAD SABIR SHAIKH
(feedback@pgeconomist.com)
Jan 17 - 23, 20
11

In year 2001, there were only six motorcycle assemblers in Pakistan. Three were Japanese (Honda, Yamaha, and Suzuki) and rest Chinese (Sohrab, Qingqi, and Hero).

Former Finance Minister Shaukat Aziz reduced CBU rate of duty in the budget 2001-02 from 105 per cent to 75 per cent and immediately after two weeks, the rate was revised up to 90 per cent at the behest of Atlas Group and PAMA.

Many motorcycle dealers including Babar Autos, Sitara Auto Impex, Moon Traders from Karachi and Lahore were compelled to import CBU motorcycles from China on the prevalent rate. They started assembling with local bran names:

1. Rocket Motorcycle
2. Guangta Motorcycle
3. Star Motorcycle
4. Jinan Motorcycle
5. Super Star Motorcycle

In 2003, CBU duty was cut down to 75 per cent and rate on CKD to 20 per cent from 25 per cent. Government, in that year, also approved four motorcycle assemblers to start local assembling. And, number of vendors/parts manufacturers increased from less than 100 to 125 units. Because of arrival of new entrants, the Japanese assemblers had to reduce price by Rs10,000.

In 2004, duty on CBU remained intact, but import duty on CKD rose to 30 per cent. However, number of vendors increased to 125 to 200 and 10 assemblers were approved. Following year, the competition got stiffest because then approximately 60 assemblers were engaged in assembling of Chinese motorcycles. The scene was overcrowded to the extent that 20 assembling units reached on the verge of collapse. Satisfyingly, however, motorcycle production crossed 375,000 units.

In 2006, government replaced the auto sector deletion programme with tariff based system (TBS). Thus, end the chapter of blackmailing by EDB and federal board of revenue (then CBR).

APMA insisted on the implementation of TBS to save sagging units. Some 22 out of 38 units adopted cost cutting measures in the wake of tough competition.

In 2007, duty on CBU brought down to 65 per cent, CKD rate of duty on non localized parts 15 per cent, CKD rate of duty on localized parts 47.5 per cent, raw material rate of duty zero per cent, etc. It should be noted that new duty structure gave a way to tax evasion by big assemblers.

Due to Pak rupee and dollar disparity, rising number of assemblers, price reduction to as low as Rs36,000, energy crisis, and disturbed law and order situation, the assemblers were bearing significant fall in profitability. In 2008-09, the assemblers produced 918000 units.

In 2009-10, all motorcycle assemblers produced record 1.4 million units in the country. Japanese assemblers produced 622000 units while Chinese-affiliated companies produced 778000 units.

At present, EDB has more influence of Japanese bike markers in policymaking. Similarly, PAMA is considered sole representative of auto industry while suggestions from APMA are not paid heed.

MOTORCYCLE PRODUCTION IN PAKISTAN 2001-10

. 2000-01 01-02 02-03 03- 04 04- 05 05- 06 06-07 07- 08 08- 09 09- 10
1 Pakistani Assemblers total production 10,319 36,923 48,208 1,02,059 185,527 299,430 4,24,629 5,03,278 4,87,321 7,64,634
2 Non-APMA Members (3 Japanese) total production 108,850 120,627 156,961 2,68,948 385,179 451,949 4,15,221 5,50,824 430,307 622,366
3 Imported CBU Motorcycles from China 0 1,560 9,700 22,692 11,300 3,300 156 0 0 0
Total Local Production 1,19,169 1,57,550 2,05,169 3,71,007 5,70,706 7,51,379 8,39,850 10,54,102 9,17,628 13,87,000

Due to very high rate of CBU duty on motorcycles, the import has come to grinding halt. The very important point is that if we import small cars in Pakistan then the CBU rate is 50 per cent and if we import motorcycle, then the CBU rate is 65 per cent. Why ? If government reduces rate from to 45 per cent, it is guaranteed that import would form not more than two per cent of total production.

China, India, Japan, Thailand and many other countries have more than 100 models/designs of bikes, but we have only three models/designs.

The writer is CEO Sitara Auto Impex and Chairman APMA, an association of Chinese affiliated motorcycle assemblers.