Early bird: Faw Motors – the only beneficiary of auto policy

The joint venture with Al-Haj Motors to bring multipurpose vehicles from 1,000cc to 1,500cc.

KARACHI:

The first and may be the only beneficiary of government’s policy to attract new carmakers, Al-Haj Faw Motors Private Limited that last week launched two 1,000cc engine vehicles, is going to get maximum advantage of the Auto Industry Development Programme (AIDP).

The five-year AIDP, which was approved by the government in 2007, is going to end in June 2012. With just a few months left, Faw Motors believes that it will be the only company to take benefit of this policy as the Engineering Development Board (EDB) has so far not approved entry of any other new automobile manufacturer.

Under the programme, the government offers some concessions to new entrants including permission to import 100% completely knocked down (CKD) kits – a complete kit to assemble vehicles – for three years from the start of assembly or manufacturing.

Al-Haj Faw Motors, a joint venture between the largest and oldest Chinese vehicle maker Faw Motors and an established commercial importer of heavy vehicles in Pakistan Al-Haj Motors, has started importing completely built units (CBU) from China and will start assembling two 1,000cc vehicles from June.

Chief Executive of the company, Hilal Khan Afridi, said the company had long-term plans to penetrate the Pakistani market with its multipurpose vehicles having engine capacities from 1,000cc to 1,500cc.

Afridi said the company would also bring latest technology of Faw Motors to Pakistan in one and a half years.

The company has completed construction of its assembly line near Karachi with an investment of Rs1 billion, which will be capable of producing trucks, prime movers, light commercial vehicles and passenger cars.

It had already been assembling trucks since October 2011 and planned to produce 6,000 trucks and 12,000 light vehicles every year, he said.

Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) has welcomed the entry of the new carmaker.

Talking to The Express Tribune, Paapam Chairman Syed Nabeel Hashmi said the new player would bring immense benefits to auto part makers and customers.

However, at the same time, he asked the government to regularly monitor valuation of imported auto parts, which in some cases were imported at less than the set duty rates. “If import valuation is done properly, it will certainly help domestic auto part makers,” he said.

The assembly plant of the new company was not so big but it was not bad either, he added.

However, in case the company deviates from the plan agreed with the EDB, the government may withdraw the concessions.

“In case of any material deviation, the EDB will initiate suitable action after necessary verification that may lead to stoppage or withdrawal of benefits allowed under the Auto Industry Investment Policy (AIIP), with retrospective effect,” the AIDP document says.

Analysts also view the entry of the new automaker positively. Atif Zafar, analyst at JS Global Capital, said the auto manufacturer would encourage competition and hence customers would get economical and quality products.

Zafar believes that the biggest Chinese carmaker, which sells its products in 70 countries, will not immediately give a hard time to the long established Japanese carmakers in Pakistan.

“But if this joint venture succeeds in providing economical and durable vehicles, it will create a good market because there is a huge demand of fuel-efficient and cheap vehicles in the country.”

Published in The Express Tribune, March 14^th, 2012.