LOCALIZATION CAN BEAT THE DOLLAR HEAT
TWO & FOUR WHEEL PRODUCERS ARE TRAPPED IN PRICE HIKES.
Oct 10 - 16, 2011
The demand of vehicles was negatively impacted due to rising interest rates, limited credit availability for auto financing, depreciation of the Pak Rupee against major currencies, and rise in prices of oil, steel and other inputs cost.
Ali Habib Chairman Indus Motor Company speaking at 22nd Annual General Meeting announced the discontinuation of Daihatsu Coure from its product line in the following months and said that discussions are underway for the new product.
Indus Motor has announced cash dividend of Rs10 per share for the year ended June 30, 2011 after audited accounts were approved in its annual general meeting. According to Indus Motor, interim dividend of Rs5 per share was given earlier bringing the total dividend paid during FY2010-11 at Rs15 per share.
Chairman Indus Motor Company said that amid all the economic and political challenges, the business environment for automakers and parts supplier remained uncertain as the industry continuously appealed for logical reasoning by decision makers, keeping in view the greater national interest.
The sales and production of Indus Motor's Toyota and Daihatsu brands for the year ended June 30, 2011 were 50,943 units and 50,759 units respectively compared to last year's figures of 52,063 units and 50,557 units respectively.
The company's sales revenue increased to Rs61.7 billion, up 2.6 per cent over Rs60.1 billion; with the after tax profit of Rs2.7 billion, as compared to Rs3.4 billion achieved during the year ended June 30, 2010. Earnings per share decreased to Rs34.9 as compared to Rs43.8 in the previous year.
In a bid to save foreign exchange, the domestic motorcycle manufactures are seeking the government's assistance in order to produce the two-wheelers with complete locally-made parts so that the industry can hit the milestone of achieving 100 per cent localization.
Industry sources said that they are very optimistic about the government's support in terms of continuation of industry-friendly policy, maintaining level-playing field and encouragement of local players to enhance their production through research and development (R&D) funds.
The local motorcycle manufacturers have successfully achieved more than 90 percent localization of parts so far but they do not want to relax here as they have eyed on the target of 100 percent deletion level. This milestone will fulfill the dream of the local manufacturers to make cheaper motorcycles available for the consumers besides saving billions of rupees foreign exchange of the country, which is spent on importing the locally unavailable parts, they added.
They revealed that the local players are trying tooth and nail to manufacture carburetors and hi-tech parts demanding high precision and modern technology. They need government's support in all means to achieve the local production of these parts meeting the international standards.
The demand of local industry to resume R&D fund is no way unjustified as the industry is progressing by leaps and bounds and any hurdle in its way must be removed. The government withdrew the R&D facility i.e. $50 per unit in 2010-11, after which the exports nosedived by 135 percent to $1.34 million from $3.5 million in 2009-10.
However, they mentioned, the bike manufacturers showed great resilience and started regaining lost grounds in international markets as during the months, April to July 2011, the industry exported in excess of 2,500 units per month. This is against an average export of around 1,200 units per month last year.
They said that if R&D fund is resumed, there is no other opinion that Pakistan will easily be able to double its motorcycle exports this year. They said that this massive recovery by local industry is testament to the resilience of this sector. The progress this sector has made over the last ten years or so is a proof that Pakistani entrepreneurs can compete with the best in the world if consistent policies are in place.
In order to effectively cope with domestic market of over 1.5 million units and after successful launch of their products in global markets, the local motorcycle producers are now planning further investment of over $150 million in their existing units. They said that almost a dozen motorbike producers having production of 50,000 units or above are now planning to expand their capacities to cope up with the market demands.
A large producer of two wheelers in the country requested the government to continue supporting the local industry with current policies as with its huge forward and backward linkages, the motorcycle industry moves the wheel of the economy.
The large vendor base that has been developed now integrates many industries and different part of the economy to create a thrust for growth. It has taken 50 years for the industry to reach a point where it is looking beyond its borders for expanding markets. In addition to now well established markets of Afghanistan and Bangladesh, Pakistani made motorcycles are now reaching new horizons exploring markets of neighboring Iran and beyond the shores to the African continent. The Middle Eastern region has also had some exploratory exports.
An official of the company said that by nature auto industry has a long gestation period. The investment intensive industry needs time to turn investment into success ridding over a long learning curve and cultivating trust with the customer over the period. Pakistan is now on the brink of developing a second industry, after the textile industry that can earn it foreign exchange. At least five more years are needed to help the industry to cement its gains.
It needs government support and understanding to maintain the growth momentum and reach that critical point where it can stand with the best in the world. The economies of scale have to reach that critical point to bring in the cost advantages that make Pakistani products more competitive.
Actually, the motorcycle industry is contributing tremendously to the economy of the country not only with investment and taxes but through various projects of corporate social responsibility with purpose and commitment.
In the words of Jack Welsh, CEO for 20 years of one of the America's largest corporations General Electric and author of the bestseller book 'Winning', only the profitable companies can contribute towards the well being of its employees and that of the society.