The prospect of trade liberalisation with India has divided the motorcycle industry in Pakistan: most of the assemblers seem in favour of the move while most of the parts and accessories manufacturers are opposed.
The motorcycle industry in Pakistan has been expanding at a rapid pace. Between the 90 assemblers and manufacturers in the country, they manufactured about 1.6 million motorcycles in 2011, a record high. Ten years ago, that number was barely above 100,000. Industry experts believe this figure may soon touch 2 million mark as demand in Pakistan continues to increase.
Many of the motorcycle assemblers believe that opening up to trade with India would help the local industry.
“The parts that we import from China through the sea routes take 60 days to reach our factories. The same consignment from India can take just 3 days through land route,” said Muhammad Sabir Shaikh, chairman of the Association of Pakistan Motorcycle Assemblers (APMA), adding that the cost of transportation from India was also lower.
Most of the assemblers in Pakistan import their parts from China, particularly from the south-eastern Chinese city of Chongqing, known as the motorcycle capital of the world. Yet despite the scale of Chongqing’s manufacturing base – the city produced 8.6 million motorcycles in 2007, more than all of India combined – the Indian industry can still supply parts to Pakistan in a shorter period of time, and for less money.
But shorter supply chains and lower input costs are not the only advantage that the assemblers see. India is also viewed as a large export market. For instance, Pakistan is the only country in the region that produces the smaller 70 cc motorcycle (most of the Indian manufacturers produce 100 cc or higher). That smaller, more economical model is likely to be a popular product in the Indian market.
There are also likely to be several synergies between the motorcycle industries in the two countries. Shaikh said he believes that, as collaboration across the border increases, Pakistani companies will learn from their Indian counterparts and add a greater variety of models to their manufacturing line-up.
Not all companies may benefit, however. Atlas Honda, the industry leader with an over 50% market share, would likely see at least some of its market share taken away by Indian motorcycles. The company aims to produce 650,000 units this year, and is edging closer to its target of 1 million units a year.
Parts manufacturers are also apprehensive about more liberalised trade with India. The Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) has called upon the government to retain the protections the local industry currently enjoys in the form of high tariffs.
“We also support trade liberalisation with India, but giving blanket support to this idea is wrong because we also have to protect our growing industry,” stated Nabeel Hashmi, the chairman of Paapam. “We want the government to adopt a go-slow policy for the auto industry of the country so that our industry can develop itself over time and then go for full-fledged competition with India.”
The government, for its part, appears to be open to the concerns of the protectionists in the automobile industry. Before leaving for the next round of trade talks with India, Commerce Secretary Zafar Mahmood held a series of meetings with the automobile industry where he assured them of government support even after opening up to trade with India.
Demand for motorcycles in Pakistan is often seen as a reliable barometer of the health of the rural economy, since most of the motorcycles sold are in small towns and villages. Global food prices have almost doubled over the last six years, according to The Economist’s commodity price index, resulting in higher disposable income amongst many rural households.
Published in The Express Tribune, November 14th, 2011.
COMMENTS (7)
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@antanu: "You are wrong Mr.Tilopa…with more than 50% Indians still living below poverty line , economy class vehicles are still in demand and will remain so for many more years to come."
1) Your poverty rate number are not correct 2) People below poverty rate do not but any automobile - so they are not target market anyway 3) The number of mopeds sold in India has ben declining for the last 10 years and currently the number of mopeds (the lowest cost automobile you can buy) sold is less than motorbikes sold.
IIt really is upto Indian consumers. If they want to buy 70 CC vehicles they will. The fact that none of the Indian mobike complanises manufacture that tells me that perhaps there is no market for that - or else what is to stop them from capturingt that market by producing this product today?.
Smaller engines do not automatically translate to more fuel efficiency. Power-to-weight ratio is also a big factor and underpowered engines tend to consume more fuel.
As far as protection goes, I think we have had enough of it now. We are continually forced to consume outdated products whether that be cars, bikes or home appliances at ridiculous prices. Some of our local entreprenuers have shown zero innovation yet raked in billions in super-profits through abnormal market power. Time to stop giving-in to their blackmail and move to free trade. Open markets could tend to encourage more technological leap-frogging than closed ones anyway.
@antanu: My Pakistani friend, the mix of motorcycles is shifting higher and higher each year. 10 years back the highest maintstream cc bike available was 156 cc (not including Enfield etc of course), today that is somewhere in the middle range with the average cubic capacity at 118 cc. Even 100 cc manufacturers are shifting upwards to 110cc. And the price of the motorbike is not the main factor in deciding cubic capacity - it is the fuel efficiency and willingness to pay. You guys keep harping on 50% below poverty line - the actual figure is 26.1% as per the last census and is likely to be around 20% now - the absolute number is 260 million. And the Tata Nano was meant to be a valid reason for lower middle class users to upgrade - this has not happened - hence Tilopa's comment. I notice the anti-India comments from you in many articles - you will get away with it as long as you don't quote statistics that can be disproved. Another factor is that in rural India, the bike becomes transport for the entire family (no doubt the same is Pakistan as well), and hence you need to take household incomes into account.
If they make imports from India duty free or nearly duty free with low duty rates you will find that the Pakistani assemblers can't compete with Indian companies. The motorcycles sold here have obsolete designs, consume more fuel and are of lower build quality than Indian products. So from a consumer's standpoint I would like to see duty free or low duty imports from India. I think it would give our local companies a much needed kick in the pants which will lead to better products and lower prices all around.
@Tilopa: You are wrong Mr.Tilopa...with more than 50% Indians still living below poverty line , economy class vehicles are still in demand and will remain so for many more years to come. And to say that TATA NAINO is failed, is grossly wrong. Its still a car my dear and not a bike...sale of cars is always low at any given time and that to in poor countries like India and Pakistan.
Sir, I would like to tell you that you are gravely mistaken. In india nobody will buy 70cc bikes because here people also want performance and not only cost.
That is why brands like "Yo-bike" (which run on electricity,which can be charged by a charger) and TATA Nano has failed. ' People want good products not just nice price.
Bottom line. Consumer decide, rules brand, quality, origin, price of the product. Government regulates, trade bodies follows, supports consumers. Consumers forms trade bodies.