AUTO SECTOR'S ROLE IN ECONOMY
Nov 28 - Dec 4, 2011
The progress of the automotive sector during the last few years remains to be a mix bag of substantial progress and equally pronounced failures. Over the last few decades, Pakistan has made great progress in the manufacturing of automobiles that has led to the creation of ancillary firms.
Pakistan now contributes a greater share of local components to the assembly line, which not only indicates greater economic activity but also points out to an increasing availability of jobs in the auto industry.
Despite commendable growth, on the back of increasing local and foreign investment in the sector, the industry has still failed to improve quality, design, safety, and sound environmental credentials of the manufactured automotives.
Although technology sophistication has improved significantly, it still fairly lags behind international standards. The auto sector still lacks value for money characteristics.
Auto sales in Pakistan jumped 61 per cent in July 2011 to 17,563 units from 10,942 units in the same month of last year. Pak Suzuki motor company recorded sale up 116 percent to 11,997 units from 4,503 seen in the same period last year.
Pakistan's auto parts manufacturing is a billion US dollars a year industry. Sixty percent of its output goes to the motor cycle industry, 22 per cent to cars, and the rest is in consumed by trucks, buses, and tractors.
The Pak auto industry is also largely self-sufficient as the majority of its output is sold within Pakistan; this reduces the country's reliance on imports and raises issues such as the protection of local jobs and the industry's contribution to the overall economy.
According to Pakistan automotive manufacturers association (PAMA), car production in the country has increased from 42,679 units in 2001-2 to 133,972 units in 2010-11 indicating an increase of 214 per cent. The production of trucks has increased from 1,134 to 2,810 units in the same period showing an increase of 148 per cent.
Subsequently, the number of motorbikes produced in the country increased from 120,627 units to 838,550 units in the same period, denoting a mammoth increase of 595 per cent. The production of buses however witnessed a decrease from 1,326 units to 490 in the last decade. The report analyzed that Pakistan failed to deliver on the key objectives of the auto industry development plan. The country failed to mobilize policy support which was necessary for achieving the set targets. These included doubling the industry's contribution to GDP to 5.4 per cent per annum and increasing the exports of the auto sector to $650 million per annum.
According to a report, with economic growth stagnating during the last few years, under the present government, the auto industry performance declined. However, the report noted that the local auto sector has entered a new phase of development where the local industry entered tariff based system replacing deletion program. It said that under the TBS framework assemblers would be free to buy components from a competitive supplier. This development is a good omen for the manufacturers since it would present them with growth opportunities.
The global automotive industry has continued to show robust growth even in the face of the worst recession since the great depression. The report said that the global vehicle production increased from 61.8 million units in 2009 to 77.9 million units in 2010.
Vehicle production has witnessed an increase even in countries that have been significantly affected by the recession. This growth can be attributed to the fact that leading global car manufacturing companies have increasingly cut down on their costs and complied with tax and legal changes. These companies have also invested in new technologies, designs, safety, and environmental conditions that have yielded positive results. Mergers and acquisitions over the last few decades of car manufacturing companies have led to an increase in their resilience to sustain business even in the face of low demand the report stated.
According to federal bureau of statistics (FBS), production of jeeps, cars, LCVs increased in the country. Production of jeeps and cars increased 9.8 per cent during the fiscal year 2010-11 as compared to last year.
As per data, as many as 134,855 jeeps and cars were produced during July-June (2010-11) as compared to the production of 122,819 units during the same period last year, showing an increase of 9.8 per cent. However, production of jeeps and cars declined 12.14 per cent in June 2011 as compared to the production of the same month last year.
As many as 10,743 jeeps and cars were produced in June 2011 as compared to 12,228 jeeps and cars in June 2010, the figures revealed.
The production of light commercial vehicles (LCVs) also surged by 22.96 per cent going up from 15,568 units in July-June (2009-10) to 19,142 units in July-June (2010-11).
In the month of June 2011, the production of LCVs also witnessed an increase of 34.01 per cent as compared to the same month of last year. As many as 1,777 LCVs were produced in June 2011 as compared to the production of 1,326 units during June 2010. On the other hand, motorcycle production in 2010-11 increased by 17.88 per cent by growing from 1,389,047 units in 2009-10 to 1,637,450 units in 2010-11.
On monthly basis, the motorcycle production increased by 16.53 per cent in June 2011 as compared to the production of the same month of last year. Motorcycle production in June 2011 stood at 149,184 units against 128,026 units in June 2010.