Country lacks research and development: Indus Motor CEO

Inconsistent policies to discourage new entrants in industry.

KARACHI: Poor research and development is hindering Pakistan’s growth in the automobile sector. Unlike India, Pakistan cannot experiment smaller cars like the Tata Nano due to poor research and development.

In an interview with The Express Tribune, Indus Motor Company CEO Pervez Ghais said that Pakistan is unlikely to see such projects as a result of limited research facilities.

Speaking on the recent price hikes, Ghais claimed his company increased car prices by only seven per cent in the last 28 months. “Looking at an annual increase of 3.5 per cent, I must say the increase is justified, he said.

“It annoys me when the government claims our cars are not in reach of the common man, because we target the niche market, not the common man. Our customers are ready to pay for quality products, as they know they will not be cheated,” he said, defending the company’s pricing policy.

He added that Daihatsu Cuore was known for its quality, which is the reason for its comparatively high price, and said the company is producing 210 cars per day at full capacity.

Speaking on the issue of new entrants in the industry, he said that automobile manufacturers will only come to Pakistan when they are offered consistent and conducive policies. “No new manufacturer will enter the industry when he sees inconsistent policies,” he said.

Elaborating his point, he explained that companies like Toyota make long-term plans, which require consistent government policies. “You see foreign investors have wide range of choices to invest in any country but they will rarely invest in markets where they see inconsistent policies,” he said.

On the policy regarding import of five-year-old cars, he believes it will hurt the local industry, but not as much as expected, as the percentage of imported cars in the market is limited to just five per cent.

Ghais highlighted the significance of manufacturing, saying populous countries like Pakistan need manufacturing-based economies. “There is nothing wrong with trading but Pakistan does not have a choice – it needs to choose either manufacturing or trading as the economy’s base,” he said.

However, he asserted that Pakistan offers strong investment scenario for carmakers, as the population is rising and energy and governance issues are likely to improve soon. Giving an example, he said, “Toyota, for example, has increased its equity share from 25 per cent to 37.5 per cent in just two years.”

When questioned on imported cars, he replied that local cars were not inferior compared to imported ones in terms of performance. “Our quality is not inferior and one can compare our quality and prices with top brands in regional countries,” he said.

Comparing the sales pattern, he commented, “I think more growth should be witnessed in small car sales, as people will prefer economical cars due to high inflation in the country. However, over the last two years, we sold more Corollas than small cars – which is not a healthy sign because it represents short-term growth.”

Published in The Express Tribune, February 15^th, 2011.