Bike makers up in arms over changing govt policy

As protections are lifted, manufacturers warn of ‘impending doom’.

Our Correspondent July 17, 2012

LAHORE: Changes in current policy governing the motorcycle industry – following the Board of Investment’s initiatives to incentivise a Japanese motorcycle manufacturer’s re-entry in the Pakistani market at zero rates – have purportedly shaken the confidence of investors and local manufacturers.

Stakeholders say the sector had progressed tremendously due to consistent policymaking on part of the government, but the new policy has threatened their – protected – growth.

“The plan to allow a new investor to import all motorcycle parts at zero duty will be a negation of previous policies, and will encourage producers to bypass local vendors and manufacturers,” said a representative of an Original Equipment Manufacturer (OEM). “This policy u-turn is worrisome and against the interests of the country and future industrialisation,” he added.

Industry players say that the portrayal of the motorcycle manufacturer as a ‘new investor’ conveniently overlooks the fact that the same brand was produced and marketed for decades in Pakistan, and was only forced to wind up due to its failure to compete with other brands – especially those from China. Stakeholders are dismayed at the government’s insistence in granting special status to this OEM on its re-launch.

“Motorcycle production has increased from 100,000 units at the start of the century, to around 2 million this fiscal year,” an official from Atlas Honda told a group of journalists, here in Lahore. “No other industrial sector has shown such high and sustained growth during the past decade. In fact, Pakistan has emerged as a global leader in the production of 70cc motorcycles.” He claimed that Pakistan now exports 125cc bikes as well.

Stakeholders complain that government claims that new investment will introduce new technology to the country are mere eyewash, as existing players have introduced the latest Euro-2 engines in their products without any special incentives. Current players are even willing to import hybrid and EFI-based engines without special incentives, they say. This is because many engine parts complying with new emission standards are produced locally, they claim.

They say that local industry, based on projections of increase in demand, has already embarked on capacity enhancement plans. By the end of the current fiscal year, they say they will have invested around $100 million in the sector, out of which a sizeable amount has already been invested, while plans for the rest are being submitted.

Published in The Express Tribune, July 18th, 2012.

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Nabil | 8 years ago | Reply

Good development... the monopoly should end now. lets hope this policy gets implemented asap so Pakistani people can have some international standard products in their own country. Bike industry must flourish not by making clones of 70cc but by introducing new quality products. This can only be done by lifting protection of existing monopolistic manufactures and exposing them to competition from international auto industry giants like Yamaha ,Kawasaki etc. ,known worldwide for their quality products... What kind of joke this is ... that by changing stickers u get new model of motorcycle each year

TR | 8 years ago | Reply

@truth Bites: Honda can't sue Local manufacturers for copying because patent rights on the CD70 technology have expired (they usually have 15-20 year limits on technology based products, depends on type of product also). This is a 40 (approx.) year old technology. I don't know why Honda has not done more to introduce new technology in Pakistan when they have been doing it the world over. They come up with new car models every few years.On the other hand Honda has been using all sorts of tactics by using their corporate influence to hinder and even stop the local manufacturers in the motorcycle industry (read about the evaluatiion method of custom duties on carburetors, among other things: forcing audits, using EDB to create red tape etc)

Even after achieveing volumes to the tune of 500,000 units a year, Honda still hasn't been able to manufacture the carburetor here in Pakistan.They still import it. So they haven't even completed the technology transfer in over 30 years. what a joke! Before the local manufaturers came into compeiition, 70cc was selling for Rs. 75000 in 2001 !!!!! (check teh dollar rate and material prices and overhead costs at that time compared to now). It was due to local competition that the price of 70cc Motorcycle fell to Rs. 35000 and Honda had to reduce its price for the consumers as well. If Honda had been innovative and pro-active they could have avoided the local competition by bringing in new technology and replacing the old one completely. Local manufacturers do not have the means to conduct research on their own. Honda is already doing it worldwide in bikes also.

What the Governement can do is, allow 0% duty only on parts that are associated with the new technology (engine, fuel injection, ignition). For body parts (frame, lights, fuel tank, side covers and others) they can keep tariffs (or non-tariff duties) to allow the local Parts manufacturers to develop those new parts here. (WTO also has a lot to do with reduction in dties, separate debate though, ut oes apply here because duties are goign down on existign parts in any case)

New technology will only become succesful if it REPLACES the existing one so that it bocomes feassible through economies of scale so it is affordable (in the same price range as 70cc) for the consumer.

Conclusion: 1) Local OEMs have only helped the consumers by providing competition (Honda had started charging exorbitant prices and had become stagnant with the technology) 2) New technology must be introduced and policy can be devised so that the new entrants and existing producers can both benefit. 3)New technology will only be succesful if it is in the same price range as the 70cc. If Honda converts, the local industry will soon follow which will evetually benefit everyone especially the consumer.

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