INDIAN INPUTS TO IMPROVE COMPETIVENESS OF LOCAL AUTOMAKERS

KANWAL SALEEM
(feedback@pgeconomist.com)

Nov 28 - Dec 4, 20
11

The automobile industry, being the backbone of any economy, is often called the mother of all industries. The automobile industry is unique as it encompasses practically all available engineering technologies.

An automobile is an integrated product created through the hard work of a multitude of auto part manufacturers, who apply multiple technologies to create a synergistic whole.

Glass working, EDM, machining, molding, textile, plastics and many other technologies are used to produce the finished automobile, using all sorts of materials, from metals to rubbers, and from fibers to plastics.

Pakistan association of automotive parts & accessories manufacturers (Paapam) was formed in 1988 to represent the industry and provide technical and management support to its members. Paapam is now over two decades old and, over the years, this association has attained a certain level of maturity by becoming an indispensable and extremely effective link between the policymaking echelons in the government and the auto parts manufacturing industry.

The association achieved recognition from the government of Pakistan in 1999 and today it is represented on many government and semi-government NGOs and committees as well as private institutions by its members. Paapam is also a member of the federation of Pakistan chambers of commerce & industry (FPCCI).

With a registered membership base of over 278 "tier one" parts manufacturers out of over 1200 industries, Paapam has under its wings part makers of cars, motorcycles, tractors, trucks and buses, who represent multi-national companies of repute including Toyota, Honda, Suzuki, Hino, Nissan, Hyundai, etc. Investments in place in the industry now exceed US$1.5 billion.

Paapam's mission is to build a competitive edge in the local automotive parts industry by maximizing local content and by creating an environment, which is conducive to innovation and rapid modernization and in harmony with latest research and development. Paapam's vision is to emerge as a strategically viable indigenized source of supply of automotive parts through maximization of local content and by meeting the industry norms of quality, price, and delivery.

The representative of Paapam has urged the government to progressively open overall trade with India after experiencing the progress at each milestone.

"Paapam held intensive consultations amongst its 350 members, being vendors of parts & components for passenger cars, motorcycles, tractors, trucks and buses in Pakistan and submitted its recommendations to the commerce ministry in view of upcoming round of talks between Pakistan and India for liberalizing bilateral trade of automotive parts," he said.

Paapam proposed that, in the first phase, trade with India might be enlarged to allow for import of raw material, machinery and equipment, tools, consumables and technology as well as joint ventures. This will improve the competitiveness of our industry and after some years, trade may be further enlarged in the area of automotive parts. Paapam warned: "If trade in auto-parts is opened up with India, it is likely that the Indian manufacturers, using their domestic volume advantage, may dump their products into Pakistan at marginal costing. This would cause irreparable damage to our local industry, which is already suffering from rising cost of production, shortage of electricity, political/economic uncertainty, and devastating law-and-order situation."

Pakistani vendors, despite the relatively low volumes of vehicle manufacturing as compared to India, have developed unique capabilities in almost all engineering/automotive technologies through massive investments over the last 15 years.

Despite the various disadvantages with respect to lower volumes as well as rising cost of doing business in Pakistan, the vendors have been able to produce high-quality parts approved by the global original equipment manufacturers (OEMs) operating in Pakistan.

At the same time, the cost of local parts is highly competitive, due to which the prices of vehicles in Pakistan (net of taxes) are lower or comparable with those in India and China. The facilities that have been set up by Pakistani vendors are of global standards.

Most of the vendors are certified under ISO 9001, QS 9000, and TS 16949 Standards and meet the test criteria requirements under Japanese inspection standards (JIS). The investments that have been made by vendors are mainly in the areas of sheet metal pressing, forging, plastic injection & blow molding, rubber molding & extrusion, steel & aluminum castings etc.

Currently, there is a long list of parts that are being locally manufactured: plastic bumpers, grills, instrument panels, seats, steering wheels, tyres, wheel rims, carpets, seatbelts, rubber seals, air conditioners, wiring harnesses, radiators, steel floor, complete doors, side view mirrors, sun visors, mufflers, motorcycle & tractor engine parts, forging & casting parts and so forth.

The Pak auto industry is fully documented and one of the top five contributors to the national exchequer. It creates employment for over 200,000 skilled workers and has been able to attract foreign investment and technology transfers from leading global vehicles manufacturers such as Suzuki, Toyota, Honda, Hyundai for passenger cars such as Honda, Suzuki and Yamaha for motorcycles; Massey Ferguson, Fiat and John Deer for tractors; and Hino, Nissan, Isuzu, Daewoo and FAW for heavy vehicles. Therefore, interest of local auto industry needs to be safeguarded while opening trade with India.