Auto industry enjoys unequaled run of success

Published: February 8, 2016
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PHOTO: ECONOMIC TIMES

PHOTO: ECONOMIC TIMES

KARACHI: The past year was no doubt a good one for the automotive industry in Pakistan. It continued its recovery from the lows of 2008-09 when 99,310 units were sold to an impressive 179,953 in fiscal year 2015. The momentum has continued and last December was probably the best closing month of a calendar year.

It is expected that the industry will match its best financial year performance to date by June and then go beyond in the remaining calendar months, unless stagflation sets in the economy, even though Pakistan’s economy is only marginally exposed to the world markets.

Auto industry expects up to $5 billion investment

Cars

The model life of some cars is due to expire so some new ones will be launched during 2016 which will help maintain the momentum of sales. Those not introducing new models will have to upgrade and enhance their offering to compete. At least one new car in the small car range or one new model is expected to be introduced.

The current year could have been a more prolific one if the government had announced the infamous Automotive Industry Policy (AIP), which is still under wraps and continues to be the source of a milieu of misgivings and uncertainty due to its long hibernation. The last plan expired in 2012. Work on the new five-year plan started in 2011, and it has been 5 years and counting. Obviously, the economic benefits of a thriving automotive industry have not been recognised by the people who ought to know better.

If a well thought out AIP sees the light of the day, some new reputable auto car manufacturers will join the fray and the customer will have more choice. Without variety, however, the industry will remain stunted and under threat.

The Engineering Development Board (EDB) will continue striving to improve the safety structures in vehicles, but without an effective Pakistan Standards and Quality Control Authority (PSQCA), it will only have limited success. The standards have yet to be drawn up, which I feel will be finalised in 2016, and with Pakistan becoming an “observer” member of WP.29, some steps towards standardisation are expected during the year.

Pakistan’s Japanese-dominated car market poised for new entrants

The United Nations Economic Commission for Europe (UNECE) World Forum for Harmonization of Vehicle Regulations (WP.29) is a unique worldwide regulatory forum which provides the legal framework allowing Contracting Parties (member countries) attending the WP.29 sessions to establish regulatory instruments concerning motor vehicles and motor vehicle equipment.

On-board electronics will play a greater role with every model change, as after price and looks it has become a key customer preference tool, especially with the younger ones. Connectivity and electronics will have to be user friendly; their mere presence alone will not do.

Digitisation itself will be important for companies and will play a greater role across the whole supply chain including sales and service. Baby steps will be taken by original equipment manufacturers (OEMs) for digital marketing, which will become more pronounced with each passing year. Auto part makers, especially those with after-market service ability, would be following suit.

2-wheelers

The 2-wheelers sales seem to have plateaued.

With mobility comes independence and with such a large population still dependent on poor urban mass transit facilities, 2-wheelers’ sale in urban areas must increase.

Suzuki considering two new models for Pakistan

On the other hand, future for growth in 2-wheeler’s sale in rural region seems grim. With large swathes of rural economy still dependant on agriculture, the rural market has suffered due to low productivity and depressed prices in the agricultural sector.

The declining trajectory on the rural front is expected to be offset any growth in the urban market.

Trucks, buses

Trucks and buses have grown in the last 2 fiscal years, but they are sitting at numbers lower than the numbers in the seventies, when I joined the industry and Bedford reigned supreme.

More truck models are due to be introduced by Dong Feng and Sinotruk, rather than by local assemblers. Shehzore brand is also expected to be revamped by the Dewan group, though it is not clear who they will be partnering up with.

Everyone is looking towards China, perhaps they should be doing so.

With much talk about CPEC and Pakistan having accepted the TIR convention, the trucking volume will grow and the industry must prepare in 2016 to be a worthy player, otherwise trucks from other countries will ride on our roads.

The writer is founder chairman of Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) 

Published in The Express Tribune, February 8th,  2016.

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Reader Comments (10)

  • Logitech
    Feb 8, 2016 - 9:28AM

    So since our local car manufacturers have finally become so successful, can we lower duties on imported cars so that I don’t have to pay Rs 2 million for a local car that comes with just one air bag? Recommend

  • Ussama Yaqub
    Feb 8, 2016 - 9:45AM

    What has the automotive industry got to do with these “impressive” numbers? It is not like they have introduced some efficient manufacturing techniques to reduce costs and car prices or have developed some breakthrough technologies to increase safety and reliability! In-fact here we have to pay a premium for such basic features as Air bags, ABS, electronic stability control which are a norm now in most of the world!

    Pakistan has one of the most outdated car models with one of the highest prices! The numbers are impressive simply because a country 200 million is being held hostage to a few car manufacturers! Their sales are bound to increase no matter the high price or low quality of cars! Recommend

  • M Bilal
    Feb 8, 2016 - 12:28PM

    Only Indus Motor (Toyota) has registered significant organic growth by virtue of overwhelming demand for its new Corolla, which off course doesn’t come up as a big surprise. Remaining is the impact of Punjab government’s order to Pak suzuki for 50,000 units of Ravi & Bolan variants for its Apna Rozgar Scheme (90% of which got produced in year 2015).

    Auto industry is the mother of many industries, when it grows – other allied industries also grow; such as steel, rubber, cables & wires, auto-parts manufacturers & their sub vendors. Unfortunately government is not acting as true enabler for the industry rather is coming up with short term fixes. Launch of auto policy can do great deal of good for the industry which needs a lot more than one order of 50,000 taxis. The policy will clear way for new entrants & also will redefine the rules for existing players. Recommend

  • abdullah
    Feb 8, 2016 - 2:36PM

    @logitech.or we can put more taxes on the local businesses so you can import it.why reduce when they are enjoying so much of benefits by giving us painted scrap with seat.Recommend

  • Rollin & Trollin
    Feb 8, 2016 - 2:54PM

    That pix is not of any facility here; looks like somewhere in SE Asia. Anyway, what are we talking about ? Manufacturing, assembly or merely import and sales of cars ? Because as far as I know manufacturing, or even assembly with a high %age of local content is still not there.Recommend

  • Feb 8, 2016 - 3:47PM

    Auto Assembler in Pakistan have monopoly. They simply sell featureless cars at very high price. Recommend

  • turbo
    Feb 8, 2016 - 4:14PM

    Pakistan auto industry is a farce till the time they keep selling us obsolete junk like suzuki mehran and they don’t even feel any shame in doing so!Recommend

  • Rahul
    Feb 8, 2016 - 5:38PM

    Where India has started making its own sports car (DC Avanti), it’s own concept cars (Mahindra Bee, Mahindra Komodo, Tata Megapixel, Mahindra Halo etc etc) and coming up with it’s own Supercar (M-Zero) why is Pakistani public still doomed to drive obsolete cars like Mehran, Bolan, Ravi and CD100? That’s terrible. Why is no one doing anything about it?Recommend

  • Ehs
    Feb 8, 2016 - 8:36PM

    First of all not some models but over 60% of cars made in Pakistan are globally retired models.

    Mehran, Bolan, Ravi, Cultus, Swift, and now even City is globally obsolete. All these cars are outdated models dumped in Pakistan.

    Mehran was pulled out of European and Japanese markets in 1988, while Bolan and Ravi are based on late 1970s platform.

    Furthermore life saving safety features like airbags are not provided in most local cars as well.

    Pakistan’s auto industry is lagging far behind other countries in technology, safety, and innovative.Recommend

  • Woz ahmed
    Feb 9, 2016 - 12:29AM

    Why have the Chinese not entered the market seriously ?

    We have 200 million plus consumers, soon to be 300 million (2050), huge middle class, high disposable income.

    Once CEPC is built Chinese exports can flow more freely and consumers will not have to put up with obsolete Mehran etc.Recommend

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