Free market or protectionism?: Local industry under threat from smuggled tyre

Published: September 12, 2011
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Top-selling smuggled tyres in Pakistan are Chinese brands while Indian and Iranian tyres are also finding their way into the local markets.

Top-selling smuggled tyres in Pakistan are Chinese brands while Indian and Iranian tyres are also finding their way into the local markets.

KARACHI: 

Rampant under-invoicing and the ease with which smuggled tyres make it to the local market are the main concerns of the local tyre industry. And, the easiest way to tackle these issues is to raid tire markets in big cities instead of trying to stop smuggling along the long Pak-Afghan border, so says Chief Executive General Tyre Mohammad Shahid Hussain.

“I can assure you that just a few months of raids on tyre markets will force vendors to stop dealing in smuggled tyres,” Hussain said in an interview with The Express Tribune, “Controlling just the big five cities will greatly hit tyre smuggling.”

The government crackdown on smuggling would save millions of dollars in taxes because it will automatically increase import through legal channels, he said.

The total market in Pakistan is around 6.5 million tyres which is equally divided into three segments. For instance one third of the market is captured by locally manufactured tyres while the rest of the market is equally divided into legally imported tyres and smuggled tyres.

The total capacity of General Tyre and Rubber Company is 2.1 million tyres per annum but the company is running on 80 per cent of its installed capacity. Hussain says the reason for this is the economic slowdown in the country.

“We want to compete with local manufacturers. But we cannot compete with thugs who sell smuggled tyres at a discount of 7 to 9 per cent,” he said.

The sale of tyres is under pressure in Pakistan. Unlike food items, tyres are not essentials, which is why the economic slowdown in last few years has severely reduced the tyre sales in Pakistan, he explained.

The slowdown in last three years has also negatively affected car sales in the country. Naturally being the biggest tyre supplier to car manufacturers, General Tyre saw its sales take a hit. Another reason is that most of the cars in Pakistan are small cars and high inflation directly affects their savings and spending patterns. With squeezing incomes and high inflation, most car owners prefer to continue with old tyres instead of new ones.

In the last budget, the government levied a 16 per cent sales tax on tractors owing to which tractor sales saw a sharp plunge in last four months. This also affected the sales of General Tyre because it is the main supplier to local tractors. Our company was in profit four months ago but today with all these circumstances we face serious financial restraints, Hussain said.

When asked, he said, the top-selling smuggled tyres in Pakistan are Chinese brands while Indian and Iranian tyres are also finding their way into the local markets.

When General Tire USA established General Tyre Pakistan in 1963, the initial production capacity was only 120,000 tyres per annum but today it produces 2,000,000 tyres per annum. The company has also signed technical services agreement (TSA) with Continental AG (Germany’s largest tyre manufacturer) to produce branded tyres.

The company is the major supplier of tyres to the local automotive and tractor assembly plants. It supplies tyres to Toyota, Honda, Pak Suzuki Motor Company, Hino Pak, Ghandhara Industries, Ghandhara Nissan, Al-Ghazi Tractors, Millat Tractors and others.

Husain hopes to see an increase in the company’s hold on the local market. “Although we do export tyres to some neighbouring and Middle East countries we want to increase our share in the local market,” he said.

Published in The Express Tribune, September 12th,  2011.

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Reader Comments (4)

  • Yggr
    Sep 12, 2011 - 1:44PM

    I would love to hear Mr. Hussain talk about the quality of their manufactured product with 80% of the people buying models of toyota and honda immediately replace them while the car milage is under 200kms. What does he have to say for that?

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  • Abdul Malik
    Sep 15, 2011 - 10:42PM

    Dear Yggr

    I would like to comment on your question about replacing Pakistani branded tires under 200km, though I am not concern with General Tire but I do concern about my beloved country.

    The reason of changing brand new tires with the imported ones is , A: easy money, fashion, show off and status in the society. I can bet if on the same local tire I put any brand even ” GREAT WALL BRAND ” of chinese origin and remove the made in Pakistan label, buyer will jump on it. As far as quality is concern, you ask first that why car manufacturers who all are renowned giant world famous have approved the General Tire, why Other manufacturers were not able to obtain the approval from the car manufacturers in Pakistan.

    My dear Yggr this is totally corrupt mental and inferiority complex issue in the nation which can only be removed by a patriotic approach.

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  • shan
    Sep 19, 2011 - 2:13AM

    dear malik,

    Firstly General has not been approved due to its quality but only due to the localisation policy of the goverment due to which car assemblers have no choice other than to use GENERAL tire as OEM which is the only local tire . I agree with yrr that the quality standard of General PCr tire is way below international market standards.

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  • Mohammad Shahid Hussain
    Nov 2, 2011 - 4:33PM

    Dear all, it was interesting to follow the comments made by you all after my interview appearing on Tribune. May I take the opportunity to clarify a few things. First of all, our tyres that are mounted on Hondas and Toyotas are not out of compulsion but only since these tyres were tested by impartial drivers by both Comnpanies in Japan without any influence from Pakistan. Out tyres came out to be as good as other top brands of the World competing on atleast 17 parameters and hence approved by both Car Manufacturers.

    Not only that, these tyres are comparitively much economical on price as compared to the brands from Europe while offering compatible quality. We are very proud that our tyres don’t burst on roads particularly motor way and highways owing to the speacial care taken on safety and more so because we know the Pakistani roads best. Our tyres last more than any other imported tyres trouble free compared to any tyres imported from abraod and this is our pride.

    Finally I have to agree with comments given by Mr. Abdul Malik above and would like to clear misconceptions that each of our tyre mounted on new cars is replaced by imported tyres. The fact is that there is only a very small portion of those end consumers that have this mind set and perhaps surplus money and who think that every thing imported is good and every local product has to be inferior. I am a living example and a user of our Euro class tyres and you bet they provide you excellent service day in and day out. So my dear Yggr, rest assured that we are good and please change your pre-concieved ideas about local products. Believe in Pakistan and believe in Pakistani talent.

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