Opening doors to India: Trade liberalisation must be gradual says automaker
Indus Motor CEO says any radical change will hurt auto industry.
KARACHI:
The opening of trade doors to India is a positive step, but Pakistan must move gradually as any radical change may affect automobile vendors who have low production compared to big Indian manufacturers, a top industry official says.
“Even if we start collaborating with Indian automakers today, it will take at least two to three years to bring any noticeable change in the local market,” Pervez Ghais, CEO of Indus Motor Company said in an interview to The Express Tribune. “What we want is a gradual progress, so that both India and Pakistan can benefit from the collaboration in the auto sector.”
Rejecting radical changes, he said auto vendors and manufacturers of both countries cooperated on various fronts, which could lead to transfer of technology.
However, he was of the view that opening of trade with India was not going to radically change anything in the domestic auto market because Indian companies had enough demand in their own market. For instance, a buyer will have to wait for six months if he or she books a new car in India.
Ghais saw other immediate problems in Pakistan to deal with than liberalising trade with India. “Our top concerns include allowing new carmakers with relaxation in tariffs, lower duty on completely built units (CBU) and some issues with the Auto Industry Development Programme (AIDP).”
The government and automakers have been at odds over tariff concessions for new entrants to the market. The government wants to bring more players with an offer of incentives, but the automakers argue that this will hurt existing players.
In an attempt to increase competition, the government has permitted entry of global carmakers having annual production capacity of 100,000 units other than Pakistan compared to production of 500,000 units in the previous policy.
“We do not oppose new entrants. They can be given land or other incentives but they should not be offered tariff relaxation as it will hit existing players,” he said.
Purchasing local parts
Ghais said Indus wanted to increase local parts in its cars as they reduced the cost. “The auto parts that we make in Pakistan make economic sense for us which is why we manufacture them, otherwise we will simply import as other carmakers of the world do.”
He was of the view that no country could produce 100 per cent car parts and every country imports them. Indonesia and Malaysia exported rubber while many important car parts were manufactured in Thailand, he said, adding even Japan and the US could not make 100 per cent parts and they too made imports.
He labelled low economies of scale as the biggest problem for the industry. Unlike India, automobile manufacturers in Pakistan have very low volumes. For instance, annual sales of four-wheel vehicles in Pakistan are around 150,000 whereas India sells this quantity in just one month.
Cuore no more profitable
Indus Motor has decided to discontinue manufacturing Cuore, a small economy car, from 2012.
“Actually, Cuore is no more profitable for us. We know that this is an entry-level car, but it is difficult for us to continue making any model which is not giving profits,” Ghais said.
In order to step up car sales in the country, he called for an increase in consumer financing. Over the last few years, consumer credit has come down following a decrease in disposable income and savings of people.
Published in The Express Tribune, October 17th, 2011.
The opening of trade doors to India is a positive step, but Pakistan must move gradually as any radical change may affect automobile vendors who have low production compared to big Indian manufacturers, a top industry official says.
“Even if we start collaborating with Indian automakers today, it will take at least two to three years to bring any noticeable change in the local market,” Pervez Ghais, CEO of Indus Motor Company said in an interview to The Express Tribune. “What we want is a gradual progress, so that both India and Pakistan can benefit from the collaboration in the auto sector.”
Rejecting radical changes, he said auto vendors and manufacturers of both countries cooperated on various fronts, which could lead to transfer of technology.
However, he was of the view that opening of trade with India was not going to radically change anything in the domestic auto market because Indian companies had enough demand in their own market. For instance, a buyer will have to wait for six months if he or she books a new car in India.
Ghais saw other immediate problems in Pakistan to deal with than liberalising trade with India. “Our top concerns include allowing new carmakers with relaxation in tariffs, lower duty on completely built units (CBU) and some issues with the Auto Industry Development Programme (AIDP).”
The government and automakers have been at odds over tariff concessions for new entrants to the market. The government wants to bring more players with an offer of incentives, but the automakers argue that this will hurt existing players.
In an attempt to increase competition, the government has permitted entry of global carmakers having annual production capacity of 100,000 units other than Pakistan compared to production of 500,000 units in the previous policy.
“We do not oppose new entrants. They can be given land or other incentives but they should not be offered tariff relaxation as it will hit existing players,” he said.
Purchasing local parts
Ghais said Indus wanted to increase local parts in its cars as they reduced the cost. “The auto parts that we make in Pakistan make economic sense for us which is why we manufacture them, otherwise we will simply import as other carmakers of the world do.”
He was of the view that no country could produce 100 per cent car parts and every country imports them. Indonesia and Malaysia exported rubber while many important car parts were manufactured in Thailand, he said, adding even Japan and the US could not make 100 per cent parts and they too made imports.
He labelled low economies of scale as the biggest problem for the industry. Unlike India, automobile manufacturers in Pakistan have very low volumes. For instance, annual sales of four-wheel vehicles in Pakistan are around 150,000 whereas India sells this quantity in just one month.
Cuore no more profitable
Indus Motor has decided to discontinue manufacturing Cuore, a small economy car, from 2012.
“Actually, Cuore is no more profitable for us. We know that this is an entry-level car, but it is difficult for us to continue making any model which is not giving profits,” Ghais said.
In order to step up car sales in the country, he called for an increase in consumer financing. Over the last few years, consumer credit has come down following a decrease in disposable income and savings of people.
Published in The Express Tribune, October 17th, 2011.