The cost of production in Pakistan is higher if compared to India primarily because of the smaller market size. PHOTO: FILE
“Not just Pak Suzuki, but the entire auto industry of Pakistan will benefit if the country opens up trade with India,” Managing Director of Pak Suzuki Motor Company Hirofumi Nagao told The Express Tribune early last week.
Nagao is very optimistic that the new government, led by Nawaz Sharif, will take swift steps to increase the growth of the auto industry.
“Indian auto part makers are not only willing to trade with Pakistan, but are also ready to transfer the latest technology to their counterparts here. This will be a win-win situation for both auto parts makers and carmakers in Pakistan,” he said, when told that some Pakistani auto part makers are apprehensive of trade with India.
Pak Suzuki wants to import Suzuki Alto engines, from India because their cost of import will be much less than what it costs to import them from Japan. Indian auto components, especially engines, are of international quality and are compliant with global emission standards like Euro III and Euro IV, he said.
“Many a time we put forward this particular requirement to the previous government in Pakistan, but we failed to convince it. Now that the new government is taking over, we are confident that we will be able to move ahead and import engines from India,” he added.
Pak Suzuki discontinued production of the Suzuki Alto from July 1, 2012 after the government made compliance with Euro II emission standards compulsory for all car producers in the country. The company says the discontinuation of the Alto has badly affected businesses of its regular vendors, who have reported a decline of over 50% in annual sales.
“We will be able to replace the Suzuki Mehran with newer models if we import engines and other components from India. But this is only possible if the two countries move forward and liberalise trade,” said Nagao.
The cost of production in Pakistan is higher if compared to India primarily because of the smaller market size. With a vast market and big economies of scale, India has an edge over Pakistan. Therefore, Pakistan’s auto industry needs to increase its volumes and achieve economies of scale to reduce car prices, he explained.
“We think Indian auto experts can be very helpful, because they understand Pakistani workers and society much better than experts from other countries,” he said.
Pak Suzuki is the biggest player in Pakistan’s four-wheeler market, with over 60% market share.
With a rise in sales and other positive developments, profits of the local auto industry are on a continuous surge.
The auto-assembly sector is now on a recovery path, as net sales grew 52% quarter-on-quarter from January to March 2013, taking revenues to Rs42.8 billion.
The growth in revenue emanated from a massive 44% QoQ growth in sales volume of the assemblers, InvestCap Research reported last Wednesday.
One of the biggest boosts to the auto industry was the government’s decision in December 2012 to reduce the age limit for import of used cars from five to three years. Other major reason is continuous depreciation of Japanese yen against Pak rupee, making import of car parts cheaper for the assemblers.
Published in The Express Tribune, May 27th, 2013.
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Oh God! It’s not too long (in past) when a common man can build prestigious home in 15Lac but it was hard for him to think about to buy a Car. And now government is saying O man! Buy a Toyota Corolla (XLI) in 15Lac and put your 15Lac on Road, Don’t think about home (which we have made impossible now for you). O man! Talk to your F&F in 1 Rupee and that on Mobile BUT Don’t think about Food (which we have made so expenses that you cannot buy 1 bread even in 5Ruppees) --- We are making you Asian Tiger and We are restoring Khalafat !!! Oppssss!!! Really Really Oppsss!!!
@Shaami: yes suzuki will set up factory in pakistan because shaami wants them to... And shaami will supply electricity to that factory 2 or 3(or less) hrs a day when ever there is power in his city and madrasa educated workers who will sit in factory and pray god to work on their behalf , fix some nuts and bolts.
What About our sole Humsayaa Friend CHINA? Our new government should start begging from them instead of requesting JAPS to manufacture Car Engines..When USA,our master doesn't help us with donations,it is our Langotiya Yaar China cumin to our rescue. And If CHINA can help us with Junk Fighter 17 they can obviously help us with building Cars in our Pakistan
@Shaami: what you are talking about comes thru will of industry( which develops after seeing and assessing the potential of the land) rather than any compulsion
I am surprised no one has mentioned about getting Chinese technology and manufacture their design cars in Pakistan. You are doing that with aircraft, why not cars. Surely the higher than Himalayas and deeper than ocean friends would bend over backwards to help Pakistan, if nothing else but to prevent India from growing their automobile business.
Japanese Industrial Giants are non commital to Pakistan period. Japan has invested little as an assembler in Pakistan selling restricted style and design cars. Since Japan is non commital the citizen of Pakistan do not see reasonable social commitment. Japan has not invested in a true deletion programs like commitment to build to build 1000cc or 1300cc engines locally. Pakistan is also non commital in promoting auto engeering and engine research cell adjoining higher education institutions. The monitering and workings of deletion programs lies in Islamabad. Pakistan has not Demand. Pakistan also takes Easy way out by Imports. Pakistan pays International Price and Japan rest Easy, just why not. No Toyota or Suzuki cricket stadium or football stadium here in Pakistan.
@Shaami Comparing Pakistan to any developed country is ridiculous. Law and order situation is terrible, people are largely unskilled and uneducated, there is severe shortage of electricity (there is no guarantee that factories would be able to run more than few hours a day) and there is no indication that things will get better anytime soon. In addition to these issues, Pakistan is not a huge market so they have almost no real incentive to invest in manufacturing here. Expecting a foreign company to invest here especially when it comes to anything sophisticated would be ridiculous. As far as funding research is concerned, first improve the standard of research at your local universities and then they might be able to attract funding from foreign companies. At present, there is almost no significant research being done in Pakistan. Most of the talented students leave the country immediately after finishing their bachelors. When Pakistanis themselves are not willing to work and invest in Pakistan expecting a foreign country to invest here is unrealistic.
@Shaami: May be you did not get the point. No company would setup a R&D center in every market it goes to until they find the right combination. Suzuki is opening a R&D center in India because it would make sense for them. They have a large market in India. A huge middle class population as buyer. There are good institutes that can provide right kind of skill to run a R&D center at a better cost than Japan or elsewhere. There are local component suppliers who can be directly engaged for change in designs etc. Comparing to all this, do you know what Pakistan has to offer for Suzuki to open a research center?
@kilo tiger Instead of 70 cc 80`s bikes, imagine the scenario of Pakistani roads with TVS APACHE, Hero Karizma ZMR, Bajaj Pulsar 220cc, 375CC, Royal Enfield Bullet 500cc, Thunderbird 500, Harley Davidson etc These Companies in Pakistan doing nothing but looting your money by supplying old and outdated technology in same prices.
its pathetic that the largest manufacturer of car in Pak is still not looking forward to complete manufacturing in in Pakistan. The govt should give 100% subsidiary to MANUFACTURING plants (and not assembling plants) in Pakistan. But that requires sane mind, and long term sincere planning, which I highly doubt the last or the upcoming govt has.
@Observer: Well it seems you never visited Korea. Japan, America and Europe then. All of the high tech and automotive companies contribute Billions in research centers in Universities and in Japan Suzuki contributes millions of Dollars to Universities of Japan to Research and Develop for them. The government and Corporate sector work hand in hand for the Innovation and development and that is how certain country progress in the end. The patents usually discovered at the university are brought into Production phase by Industry.
The new government should allow import of fully finished cars from India rather than helping Pak-Suzuki to increase its profits.Indian cars are not only of much better quality (than what Pak-Suzuki is supplying us here) but also very economical priced
@Shaami Suzuki is a business house and they will take the decision of manufacturing the cars in Pakistan when it makes business sense. I am not sure why it is still not making the business sense. It could be because of the size of market, absence of quality tier1/tier2 suppliers, availability of power, available skillset, political instability etc or it would be combination of all these factors.
@Shaami
That would be a valid point if Pakistan were a big enough market. It is not so the economies of scale (which is vital in manufacturing) do not exist. Suzuki makes more than a million small cars in India annually which is more than it has ever made in Pakistan during its entire presence there.
@Shaami:
Establishing research and development in universities is not the responsibility of a foreign manufacturer. It is the responsibility of the Pak government. Unless it was part of the original agreement to design and manufacture engines, Suzuki can't be faulted since it takes quite a bit of new capital to establish a new engine factory and associated technologies. What is wrong in foreign companies from making profit from their investment?
There is a lot of research and development locally. With tlhe water kit, there will be no need to import engines from India. Rather, we can be exporting it to India (not!) and other countries.
MD Hirofumi Nigao stated...We will be able to replace the Suzuki Mehran with newer models if we import engines and other components from India...
Yeah Pakistan is a place to assemble only and to reap benefits only. Suzuki have the ability to set up a Manufacturing unit of Engines and spares in Pakistan but that is the pathetic commitment of Suzuki to Pakistan that they are neither able to fund any research in any university so far and also made our country a ground to sell the products rather than contributing to Research, Development and to local manufacturing in any case. Our government must force Suzuki to develop engines locally rather than dictating us that allow Suzuki to import engines from India. Japanese love non Self Reliant and stupid countries like Arabs and Pakistanis as we dont develop anything and this help Japan and its allies like India to to sell us finished goods and reap all the benefits.