Trade competition: Pakistan’s auto industry determined to find middle-ground with Indian counterparts

Local car assemblers are willing to import completely knocked down parts, but opposing imports of built units.

The local auto industry has been fearful that Indian automakers will dump their products in Pakistan. PHOTO: FILE


When former Pakistani government hinted that it is going to liberalise trade with archrival India, the Pakistani auto industry was on the forefront to oppose any such move. However, after two years, not only has the harsh opposition from auto industry diminished but it also seems to see swift progress on issues pertaining to trade with India.

Despite all this change of heart of local auto industry, Pakistan stands exactly where it was in December 31, 2012 – the date that it fixed to complete the procedure of giving most favoured nation (MFN) status to India.

The local auto industry has been fearful that Indian automakers will dump their products in Pakistan leaving them uncompetitive because of their big industry size and economy of scale, whereas, they will have fewer opportunities in India because of the problems of non-tariff barriers (NTBs).

After initial opposition to the very idea of liberalised trade with India, car assemblers of Pakistan are willing to import parts that are completely knocked down (CKD), but are opposing imports of completely built units (CBUs).

The idea to import major car parts from India is feasible because it will reduce the cost of production of cars. Pakistan imports car parts from Thailand and Japan that can be easily imported from neighbouring India owing to its proximity with the country.

Although former government failed in granting the MFN status to India in spite of fixing the final date, Pak Suzuki Motor Company – the biggest player in four-wheeler market with over 60% market share – is hopeful that the new government of Pakistan will improve trade relations with India.

Pak Suzuki looks more enthusiastic unlike the other two carmakers Honda Atlas Motors and Indus Motors because of Suzuki Maruti, an affiliate of Suzuki Japan with over 50% market share in India from where it can import cheap parts for its cars in Pakistan.

Indian auto part makers are willing to transfer latest technology to their counterparts in Pakistan and this will be a win-win situation for both carmakers and auto parts makers in Pakistan, Managing Director of Pak Suzuki Motor Company Hirofumi Nagao told The Express Tribune in May.

Pak Suzuki discontinued its Suzuki Alto from July 1, 2012 when government of Pakistan made compliance of Euro II emission standards mandatory for all the car producers in the country. The company not only wants to import Alto engines from India but also launch new models especially in small engine category with the help of cheaper Indian components.

Pakistan has to move forward consistently in trade with India. Last year, there was a big hype of trade with India but for the last 6-7 months, we just forget this important issue, an official of Indus Motor, the makers of Toyota Corolla said.

Indus Motor officials recently went to Japan where they discussed the developments in Pakistan-India trade with their parent company, Toyota Japan.

“We have requested Toyota Japan to equally support both of its affiliates in India and Pakistan because some car components of Toyota cars are cheap in Pakistan and some are cheap in India. So both of Toyota affiliates will grow if they collaborate with each other,” he added.

Auto parts makers – the other important stakeholder other than carmakers in auto industry – say, that trade with India is difficult owing to widespread mistrust between India and Pakistan and NTBs that discourage Pakistani exports in India.

Auto parts makers say that they are ready for joint ventures with India auto parts makers, but they still look much more concerned if compared to automakers on trade with India.

On the other hand, Indian government says that there are no Pakistan specific NTBs in India and that it is bringing swift changes in systems especially at Lahore-Wagah route to facilitate bilateral trade.

Like other industries, auto industry is closely watching how Nawaz Sharif’s government is going to take forward trade talks with India and especially when he gives MFN status to the archrival.

Published in The Express Tribune, July 22nd, 2013.

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Atif | 10 years ago | Reply

First of all I would like to correct the other posters here, who are showing their pro-pakistanism without even thinking how to the auto industry works. It is time to open your eyes and understand the unfortunately state our auto industry is in. Realizing our current state is the first step towards progress!

Do you guys even have any idea where our auto industry stands ?. There is little competition and we are assembling -note the word assembling not manufacturing- obsolete cars with zero safety or environmental standards. Japanese manufacturers, especially Paksuzuki, are very sharp and they are not transferring any technology to Pakistan for the past twenty years as they have formed a lobby which enjoys government protection to the maximum extent. Paksuzuki was even against allowing new assemblers to enter the local industry (despite the fact that it would bring competition and create jobs).

Imports of components from India will simply be a cheaper substitute for imports from Japan or Thailand.

Keep defending the mafia auto industry (which by the way is serving Japanese interests more than Pakistani) under the false pretext of nationalism and I guarantee you there will be new assemblers here and you guys will still have only 1 small car, the mehran, for the next 20 years or more....

dude | 10 years ago | Reply

get india cards, they are most suitable to pak conditions..

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