Audi AG expresses intent to assemble vehicles in Pakistan

Published: November 15, 2016
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KARACHI: Pakistan is definitely on the international investors’ radar and the auto industry that has for long been dominated by Japanese players is poised for a face-lift.

In the latest development, German carmaker Audi AG has expressed its interest in setting up an assembly plant in Pakistan and, through its authorised importer in the country, submitted a letter of intent to the Board of Investment (BoI) for consideration.

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Ali Khan, head of automotive at Premier Systems Private Limited, which is the authorised importer for Audi AG in Pakistan, confirmed the development in an exclusive interview with The Express Tribune.

“Audi AG has expressed the interest via its authorised importer in Pakistan to set up an assembly plant in Pakistan,” Ali told The Express Tribune, adding that land for the plant has been purchased in Korangi, near one of Pakistan’s biggest industrial estates, and would mean a fresh investment of over $30 million.

Audi AG is represented in different countries through either authorised importers or assembly/manufacturing plants – the latter investments coming after the country has shown enough appetite for the luxury brand. Pakistan is one of 57 countries where Audi AG is represented by an authorised importer.

“Audi AG first signed a memorandum of understanding with the Sindh Board of Investment (SBI) to consider Pakistan as a potential market in May this year. We studied the automotive policy (approved by the government in March) to see if it’s a viable case. After three-and-a-half months, we, on behalf of Audi AG, sent the letter of intent to BoI, expressing that we would like to assemble vehicles in Pakistan.”

Historically low interest rates, rising middle class and growing appetite for international brands have meant that Pakistan has become an attractive destination for foreign investors. French manufacturer Renault has already announced its intention to partner with Ghandhara Nissan to assemble vehicles in the country where consumers are desperate to see variety after being restricted for choice for decades.

Macroeconomic stability, improved security situation, and a government widely perceived as pro-business have further incentivised international companies.

“People are hungry to see a new brand. Lower interest rates have meant that vehicles are more affordable. The fact that 40,000 vehicles are imported into the country through the grey market means there is ample room for Audi.

“The reason why we would like to assemble cars in Pakistan is to help reduce the grey import of used cars. It means a warranty and an after-sales service within the country.”

Audi currently sells 900 imported units a year in Pakistan, a number Ali expects to go higher once the assembly plant is given the go-ahead by the BoI. The country incharge for Pakistan and Bangladesh also foresees the prices of lower-engine models to decrease in the range of 5-10% if assembled in Pakistan. “It depends on what the government offers us. But I feel a 5 to 10% decrease in prices should happen. With regards to the heavier engine models – over the 1.8L categories – I see a much bigger decrease of around 20%.”

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Ali’s explanation means the A3 model, currently priced at Rs4 million, could come down to between Rs3.6 million and Rs3.8 million.

The new auto policy

However, the official said the current auto policy needs to include a feature that caters specifically to brands like Audi, BMW or Mercedes. “There has to be something that caters specifically to these brands. Globally, this is the case. We do not compete on volume. The plant in Karachi could go up to a maximum of 5,000 units a year.

“One needs to understand that Audi is a luxury brand, therefore there are certain conditions attached in the assembling or manufacturing of our vehicles. Sourcing local components at this stage is just not possible, as there are neither vendors nor material available in the country. However, we believe given time; 10-15 years down the line Pakistan can be a country where any luxury manufacturer could source local components for the assembly / manufacturing of their vehicles. The vendor industry in any country adapts automatically to supply and demand forecasts.”

Published in The Express Tribune, November 15th, 2016.

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Reader Comments (20)

  • Saeed Masood
    Nov 15, 2016 - 10:07AM

    Very good for Pakistan, jobs will be created, Europe will win in the end, Pakistan needs Investments. Recommend

  • salman
    Nov 15, 2016 - 10:14AM

    Great news. Lets get rid of Suzuki monopoly.Recommend

  • Munir
    Nov 15, 2016 - 10:17AM

    Please Audi Please…the sooner the better…I’m tired of driving Hondas for nearly 2 decades. Would love to see a locally manufactured S3 parked in my garage.Recommend

  • Bilal Masood
    Nov 15, 2016 - 10:25AM

    I think we should not be naïve to assume that they will remove the premium a luxury brand demands. Be it the materials they use, the brand value and last but not least their technology and the safety aspects installed in their vehicle. I think this should be more about that Pakistan is being considered as a nation for them to assemble vehicles. This is a huge thing for us as Pakistani’s and maybe we should appreciate it. Recommend

  • FAZ
    Nov 15, 2016 - 10:33AM

    Good thing is that we are hearing the news via Audi’s true reporesentatives here in Pakistan. Last time the news of a European manufacturer entering Pakistan was via the “government”Recommend

  • Good news.
    Nov 15, 2016 - 11:05AM

    Pakistan market is for small cars, as anyone with interest in car market knows. Audi makes big cars, therefore the market for Audi’s is limited. If the Germans, French, Americans, Indians, Chinese start making small cars 500 c.c. to 1000 c.c, there is a huge market in the world. Pakistan market is really for motor cycles, then small cars, then medium, and then only the rich can afford what Audi makes. Recommend

  • AKA
    Nov 15, 2016 - 11:53AM

    @Good news.: are you dumm and stupid ,those car is to export to middle e,Recommend

  • Sawaiz
    Nov 15, 2016 - 11:55AM

    Ma Sha ALLAH!
    These are the fruits of investment friendly Policy of Government! Recommend

  • Zubair
    Nov 15, 2016 - 12:04PM

    Great times for Pakistan auto industry ahead.Recommend

  • Careless Whisper
    Nov 15, 2016 - 1:10PM

    FRUITS of CPEC…. :)Recommend

  • Yasser
    Nov 15, 2016 - 2:16PM

    Pakistanis are sick of Suzuki cars. We need Nissan, KIA, Chevrolet on same prices as available internationallyRecommend

  • Muhammad Moazzam
    Nov 15, 2016 - 4:10PM

    we need Volkswagen cars to they are cheaper available around the globe but I wonder why not in Pakistan . Recommend

  • Shakil Ahmed
    Nov 15, 2016 - 4:51PM

    VW could be much better if they make cheaper VW brand for Pakistan market, if they wish to export Audi still a good option. official import of audi may be lower, but anyone can import an Audi as personal baggage allows it.Recommend

  • Fawad
    Nov 15, 2016 - 8:33PM

    This is good. As BMW shoes interest in introducing lower end models. Pak govt. needs to negotiate with BMW to assemble cars in Pakistan to create jobs as Audi has shown interest to build as well. It’s a great time to boost economy and break the monoply of Toyota & Honda motors in Pakistani market to have a healthy rivals.Recommend

  • Farru
    Nov 15, 2016 - 8:45PM

    Why not VW lovers make a FB page to tell them that they already have a big support in Pakistan?
    This might help them to reach a decision about this market :)Recommend

  • Fawad
    Nov 15, 2016 - 8:49PM

    @Good news.:
    Audi has shift its strategy now they make 1.8 or 2.0T fuel economy cars which is ideal for Pakistani market. As Honda & toyota offers same engines as Audi does. Audi & VW are great cars. Pakistan needs to get rid of dual monopoly cars brand.Recommend

  • Truth
    Nov 15, 2016 - 9:21PM

    Welcome…Recommend

  • Ehs
    Nov 15, 2016 - 11:22PM

    It is good news. Government must support new entrants.

    Old players like PakSuzuki must not be allowed to jeopardize new investment in the country. Government must allow MKD’s and introduce further incentives for new players.

    Competition is the need of the hour.Recommend

  • Faisal Afzal
    Nov 16, 2016 - 6:51AM

    Who cares? Making a luxury car in Pakistan makes no sense but whatever it will take to make it look like PML-N is doing a great job at bringing investment.Recommend

  • Logitech
    Nov 16, 2016 - 8:49PM

    I want Ford Focus. The luxury series!Recommend

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