Despite slump, new auto players continue to invest

New carmakers have been given duty relief on import of auto parts

KARACHI: At a time when the auto sector is plunging in an abyss of declining sales, new players are hopeful for the future and are making gradual investment.

In a positive sign, Hyundai Nishat Motor (Private) Limited has recently inaugurated its dealership in Faisalabad.

"It's a gesture of hope that we are investing in a slump phase," said Mujtaba Yaqoob, Marketing Manager at Hyundai Nishat Motor. "The economic slowdown will not last forever, the market will pick up and for that time we are investing."

Hyundai Nishat Motor to start production in Jan 2020

The company has set up its plant in Pakistan and has produced 100 cab-over trucks namely Hyundai Porter or Hyundai H-100, he said. The company intends to introduce four models with the interval of six months for each of them.

New players, Hyundai and Kia Lucky Motors, have been given duty relaxation on auto part imports compared to older Japanese auto players, therefore, their profit margins are coming from that relaxation, said JS Global Capital senior analyst Ahmed Lakhani.

In first seven months of the current fiscal year, inflation stood at 11.6%. It surged to a nine-year high at 14.6% in January 2020.

In 2019, cars sales declined by 40%. Next year, the automakers may not be able to make much difference in sales numbers but sales must pick up with time in line with the economic cycle in Pakistan, said the analyst.

The new players are investing in combustion-engine vehicles, which appears to be an outdated technology in the modern world, according to Lakhani. The government is also working on the electric vehicle policy, which will take some time.

However, the new players are ready to go with the trend as their parent companies are bringing new electric models, said the marketing manager. It will take time to set up the infrastructure for electric vehicles and "once it is installed we will readily go into the electric vehicle business", he said.

Published in The Express Tribune, February 15^th, 2020.

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