Competition in auto sector needed

The government’s plan of bringing in a European car manufacturer to establish its footprint in Pakistan seems to have suffered a blow, as the policy for the automobile sector, which would have paved the way for such a scenario, was tabled and then whisked away for further consultation for the umpteenth time. At a meeting of the Economic Coordination Committee, which has been shown the proposed auto policy several times already, the summary was stopped from being approved as a committee member pointed out how the proposal maintained benefits for existing manufacturers in the country. The objection highlighted how any new manufacturer would be unable to compete with current players if the same incentives were extended across the board, denting the PML-N’s intention of bringing in a European manufacturer to the country that has been subjected to limited choice and sub-standard quality of cars for decades.

Pakistani consumers have long waited for more choice to be at their disposal as they move away to imported vehicles to satisfy their need for quality and value for money. Currently, three manufacturers dominate the industry and have posted billions in profits in 2015. Their success is symbolised by their stock prices that have outperformed the benchmark-100 index by miles, but are consumers truly pleased with what they own? The three car-makers have exercised their ‘monopoly’ to neatly segregate the market, dominating sales from lower- to upper-tier models. The government might be eager to bring in new investment, but that will have to come at the expense of vested interests that are bent on ensuring the current trend in the auto sector remains intact. There is a reason why the proposed auto policy has remained pending for years now. Pakistani consumers remain victims to the whims of corporations that seek to maximise profits with there being little regard for consumer needs. With low interest rates, depressed oil prices and banks’ eagerness to tap consumer financing, the time to bring in a foreign manufacturer is now. The government needs to take advantage of this.

Published in The Express Tribune, March 11^th, 2016.

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