Three companies get approval to set up car assembly plants in Pakistan

Published: June 21, 2017
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All three companies would separately enter into agreements with Ministry of Industries and Production to ensure compliance conditions of the Automotive Development Policy 2016-21. PHOTO: REUTERS

All three companies would separately enter into agreements with Ministry of Industries and Production to ensure compliance conditions of the Automotive Development Policy 2016-21. PHOTO: REUTERS

ISLAMABAD: The government took a huge stride towards shaking up the Japanese-dominated automobile industry, granting permission to three new, but non-European, companies to set up their car assembly plants in Pakistan.

The companies in collaboration with local partners will invest $372 million to set up the assembly/manufacturing plants.

The Ministry of Industry and Production allowed United Motors Private Limited, Kia-Lucky Motors Pakistan Limited and Nishat Group to set up units for assembly and manufacturing of vehicles under the Greenfield investment category, Ministry of Industries Secretary Khizar Hayat Gondal confirmed to The Express Tribune.

He said that these companies would bring in foreign investment worth $372 million. The maximum investment of $190 million will be made by Kia-Lucky, followed by $164 million by Nishat Group and $18.1 million by United Motors, he added.

As many as nine companies had sought permission to set up manufacturing plants but only three could got the approval in the first phase. The secretary said that the documents of other applicants are being scrutinised.

The decision comes days after the Prime Minister’s Office decided to abolish the Engineering Development Board (EDB) on allegations of corruption and creating hurdles in the way of setting up new car manufacturing plants in Pakistan.

New car manufacturing plants face delay

“The government of Pakistan is pleased to award the Category-A Greenfield Investment Status to United Motors (Pvt) Limited for assembly/manufacture of vehicles covered in the exclusive contract agreement,” according to a notification issued by the Ministry of Industry. Similar notifications have also been issued to two other companies.

These firms had submitted detailed business plans and relevant documents to the EDB for assessment. United Motors would set up a plant with Chinese collaboration. The Nishat Group will be in partnership with South Korea-based Hyundai Company and Lucky Cement would also collaborate with another South Korean firm, Kia Motors.

In the hope of attracting a European carmaker, the government in March last year had approved a new automobile policy, offering tax incentives to new entrants to help them establish manufacturing units and compete effectively with the three well-entrenched assemblers.

The Board of Investment had claimed that European car manufacturer Renault was keen to set up a car plant in Pakistan and the government was holding negotiations with them. However, sources said that neither Renault nor Volkswagen submitted applications for setting up plants in Pakistan.

Gondal hoped that once the automobile policy takes roots, the European brands would also come forward. Another meeting of the Auto Industry Development Committee is expected to take place after Eid to review more applications.

800cc or 1,000cc – Nishat to decide which car to produce first

However, in violation of the automobile policy, the federal government did not cut custom duties on import of completely built units (CBUs) by 10% from July 1, 2017.  Such reversals discourage foreign investors who seek consistency in policies in return of long-term commitments.

A senior official of Lucky Cement confirmed to The Express Tribune that the company has been given permission to set up a plant in Pakistan. Lucky Cement would have 60% share in the joint venture and will invest $150 million, he added. The new venture will also market and sell, besides import and export of all types of Kia vehicles, parts and accessories.

All three companies would separately enter into agreements with Ministry of Industries and Production to ensure compliance conditions of the Automotive Development Policy 2016-21. The EDB will issue manufacturing certificate and list of importable components to new investors after verifying that the manufacturing facilities established by the firm are adequate to produce roadworthy vehicles.

The three new players are expected to shake up the Japanese-dominated car market and loosen the grip of Toyota, Honda and Suzuki.

Automobile industry: Pakistan woos Renault-Nissan in investment push

Nishat Mills Limited would assemble vehicles with Hyundai Company. The two companies together will set up a Greenfield project for assembly and sales of HMC passenger and 1-ton range commercial vehicles in Pakistan.

Under the new automobile policy, the government has allowed one-off duty-free import of plant and machinery for setting up an assembly and manufacturing facility. It has also permitted import of 100 vehicles of the same variants in the form of completely built units (CBUs) at 50% of the prevailing duty for test marketing after the ground-breaking of the project.

A major incentive for the new investors is the reduced 10% customs duty on non-localised parts for five years against the prevailing 32.5%.

Similarly, localised parts can be imported by new entrants at 25% duty compared to the current 50% for five years. A-category investors will be entitled to import of 100% parts at 10% customs duty for a period of three years in respect of passenger cars below the 800cc category.

They will also be entitled to import of 100% parts at prevailing custom duties applicable to non-localised parts for a period of three years in respect of buses, trucks, tractors and prime movers.

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Reader Comments (21)

  • Lakhkar Khan
    Jun 21, 2017 - 7:03PM

    Dear Mr. Modi, Pakistan is Soooooo isolated……. Recommend

  • Khan
    Jun 21, 2017 - 8:22PM

    It is indeed good news. The government must also try to attract European (volkswagen,renault-nissan) and American (general motors) investors into the country.

    Paksuzuki’s monopoly must be broken in small car segment. Taxes should also be reduced.
    Also, instead of used cars our focus should be on modern international standard local cars.Recommend

  • Abdul Majeed Sheikh
    Jun 21, 2017 - 8:39PM

    The proof of the pudding lies in its eating. Government is required to closely monitor inflows of investment and real localization. Keep a watch on transfer pricing. This is a good step towards motorazation Recommend

  • khalid khan
    Jun 22, 2017 - 4:11AM

    It is a good news. we may see quality cars of South Korea and China with less prices,
    and also opportunities of jobs and business,,Recommend

  • Zahid Khattak
    Jun 22, 2017 - 9:45AM

    Pakistani Customer is still million miles away from the taste of luxury drive. They are still forced to ride on local manufactured/assembled uncomfortable and unsafe passenger vehicles (i.e Corolla base modal doesn’t comprise any single air bag or look at famous Mehran or Alto). Government to expedite the approval process and facilitate/encourage the new entrant , specially European car makers. Also govt need to look into/monitor the prices of local manufactured cars , which are at a very higher side if compared to our neighboring countries.Recommend

  • Dr. Raza Shah
    Jun 22, 2017 - 10:13AM

    What the heck is this….all the three companies are sub standards we need quality cars. I am sure the government has taken bribe from these cheap car manufacturers. Different international brands have shown their interests like Nissan, Renault, Volkswagen etc and we must consider them….. Recommend

  • Rex
    Jun 22, 2017 - 11:08AM

    @Lakhkar Khan:
    With 3 car companies only? And only doing assembly using screwdriver tech?
    Yes, indeed!Recommend

  • Last Man Alive
    Jun 22, 2017 - 12:34PM

    We need to free ourselves from these greedy Japanese auto makers

    selling us junk at exorbitant pricesRecommend

  • Logitech
    Jun 22, 2017 - 1:04PM

    Cool. More cheap, low-quality and ugly hatchbacks to clog our roads.Recommend

  • sachin
    Jun 22, 2017 - 2:38PM

    @Lakhkar Khan:
    How is Modi related to someone wanting to sell something in your nation?Recommend

  • Asif
    Jun 22, 2017 - 2:42PM

    Government should consider state of art public transport system instead of car assembling/ manufacturing plants. It will decrease petroleum products import bill. it will be good for environment. It will decrease the demand of cars result in lesser price. however, government should pan export oriented auto manufacturing of vehicles this is instant source of foreign exchange. Recommend

  • faisal munir
    Jun 22, 2017 - 2:58PM

    It looks very attractive but in reality it will eventually completely demolish our local manufacturing market. Desperately requires a comprehensive policy which do not only save our local manufacturer and supplier but also help them to upgrade. Secondly our aim and focus will always be on our own completely Pakistani car with complete technology in Pakistan, Every step must be taken in the light of that passion. Recommend

  • Fariha
    Jun 23, 2017 - 3:32AM

    Some where in this post i could see last nail in the coffin of Pak Suzuki motors….Recommend

  • gp65
    Jun 23, 2017 - 3:48AM

    @Lakhkar Khan: Your 3 borders have a problem. Most head of states and non-Chinese businessmen unwilling to visit Pakistan. Most countries make it very difficult for Pakistanis to get visas. No meaningful FDI coming from anywhere besides China and most Western companies located in Pakistan are gradually reducing their footprint in Pakistan. Last year, US Congress refused to allow subsidy to Pakistan for F-16. Last year SAARC summit could not be held in Islamabad because Nepal, Sri Lanka, Bangladesh, Bhutan and Maldives supported India in the aftermath of Uri.

    You are far more isolated than you were.Recommend

  • fareed ashraf chaudhry
    Jun 23, 2017 - 4:02AM

    not impressed. i would have liked to see european car manufacturers make their way into pakistan. Recommend

  • Sofia Nusrullah
    Jun 23, 2017 - 4:21AM

    With the unemployment rate in Pakistan exceeding 20% interesting to read people question quality of jobs and have you heard the term beggars cannot be choosers? When people with education are suffering with no decent jobs then these online assemblymen jobs are better than starving! Recommend

  • Hamza Khurshid
    Jun 23, 2017 - 10:29AM

    So, be ready for cheap cars with cheap quality. The roads gonna be highly satutated by cars in a matter of a few years. So traffic and pollution is going to become a very huge problem of pakistan.Recommend

  • Abdul
    Jun 23, 2017 - 3:06PM

    @lakhar, bhaijaan use little logic and don’t be so obsessed with others. We should first look into our side and eliminate bad elements from our society then only others will trust us with their money and invest more in our country, at the moment everyone is trying to get their cut and is least bothered about what is being offered and what is the price hence we seem to be isolating our selves from the latest technology and developmetnRecommend

  • Lakhkar Khan
    Jun 23, 2017 - 6:33PM

    @Abdul:

    You missed the point. My comment was in response to Modi’s claim to isolate Pakistan. See the relevancy? Recommend

  • sterry
    Jun 24, 2017 - 1:24AM

    @gp65: Pakistan is hardly isolated but the economy is taking off. After all that’s why so many Indians like you are here to scream that things are not taking off ! What you need to do is read reports from independent Western sources like Bloomberg, Standard and Poors or Moodys. All are giving favorable ratings to Pakistani economy which is the fastest growing in the Muslim world. I understand this bothers Indians but it shouldn’t. India needs to ask why it has bad relations with all of its neighbors including Nepal, Sri Lanka, China and Pak. Just wasting money on air link with its Afghanistan puppet won’t amount to much long term.
    @fareed ashraf chaudhry: Some folks will never be impressed in Pakistan but the world financial houses in the West are positive on the Pak economy since this government has taken control. It’s only a matter of time before VW and Renault come too.Recommend

  • sheraz
    Sep 22, 2017 - 5:16PM

    Government must be focus on European car companies .Recommend

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