Pakistan's Japanese-dominated car market poised for new entrants

By AFP
Published: August 2, 2015
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In this photograph taken on July 26, 2015, people gather around cars at the Sunday car market in Karachi. PHOTO: AFP

In this photograph taken on July 26, 2015, people gather around cars at the Sunday car market in Karachi. PHOTO: AFP

ISLAMABAD: Pakistan’s car market has been dominated by Japanese automakers for decades, but a mini-economic revival looks set to attract new players from Europe and Korea into the mix.

Despite heavy taxation on imported vehicles, enthusiasm for owning a car in Pakistan has remained undented — thanks in part to underdeveloped public transport in the country’s sprawling cities, but also the social status it brings.

In this photograph taken on July 25, 2015, people ride in a car on a street in Quetta. PHOTO: AFP

Toyota, Suzuki and Honda car assembly plants already work around the clock in Karachi and eastern Lahore — yet customers can still wait for up to four months for new vehicles to be delivered.

Now demand for cars in the South Asian giant of 200 million people is accelerating even more quickly, as economic growth has reached its fastest pace since 2008 while renewed investor confidence and easing inflation have spurred consumer spending.

Keen to cash in, a delegation from German auto giant Volkswagen visited the country in recent weeks, according to Pakistani officials and German diplomats.

In this photograph taken on July 25, 2015, people gather around vehicles parked in a car showroom in Quetta. PHOTO: AFP

Company spokesperson Christoph Adomat told AFP that while “Volkswagen is constantly evaluating market opportunities on a worldwide basis… there are no decisions for an investment from Volkswagen side in Pakistan”.

Miftah Ismail, the chairman of Pakistan Board of Investment who took part in the talks, said Volkswagen was not the only company expressing an interest.

“There are a number of other companies from (South) Korea and Europe that we are talking to who are thinking of setting up assembly plants in Pakistan,” he said, without naming the firms.

US and European cars dominated Pakistan’s roads in the early years after it gained independence from Britain in 1947.

In this photograph taken on July 25, 2015, a worker cleans a car parked in a showroom in Karachi. PHOTO: AFP

But fuel prices made their compact, efficient Japanese rivals more popular and from the 1960s onwards manufacturers like Toyota, Suzuki and Honda gained a stranglehold on the market.

Italy’s Fiat made a brief foray in the 1990s, while South Korea’s Hyundai as well as Daewoo-owned Chevrolet tried — and failed — to gain a foothold in the 2000s before the financial crisis forced them to exit.

Because Pakistan charges heavy duties on imported cars less than three years old, Japanese companies with in-country assembly operations can set prices significantly above the regional average.

The bottom-of-the-range Suzuki Mehran costs the equivalent of $6,300 in Pakistan but sells for around $3,900 in India. The most popular Corolla 1.3 sedan starts at 1.6 million rupees, but buyers have to wait months or pay $1,500 for prompt delivery.

The news that Volkswagen was exploring options to enter the Pakistani market has excited car enthusiasts, who are tired of high prices and limited choices.

In this photograph taken on July 25, 2015, mechanics repair a Volkswagen Beetle in Lahore. PHOTO: AFP

“I think it is a great idea because Volkswagen cars are value for money and reliability,” said Romano Karim, a fan of the classic Volkswagen Beetles from the 60s and 70s that can often be seen on Pakistan’s roads.

Haji Mohammad Shahzad, chairman of the All Pakistan Motor Dealers Association, added that having Volkswagen in the market would help drive costs down.

“The monopoly of big three could be broken if Volkswagen produces at least 20,000-25,000 cars annually,” Shahzad told AFP.

Global auto giants are attracted by Pakistan’s booming economy, which the International Monetary Fund predicts will grow by 4.5 per cent in the next financial year.

Investor confidence in the medium-sized economy of $232 billion has improved since a new business-friendly government led by Nawaz Sharif took power in 2013, with Karachi’s share market among the world’s top 10 performers in the past year.

In this photograph taken on July 26, 2015, vehicles stand on display outside a car showroom in Lahore. PHOTO: AFP

The country is also undergoing a major construction boom driven by Chinese investment after President Xi Jinping visited Islamabad in April to unveil a $46 billion investment plan known as the China-Pakistan Economic Corridor.

Car sales have also boomed thanks to the growth of car leasing and financing facilities. Sales in the 11 months to May this year rose 30 per cent from a year earlier, according to industry group the Pakistan Automotive Manufacturers Association.

Baber Kaleem Khan, editor of PakWheels.com magazine, said Volkswagen would be well poised to tap into the lower to mid-range market.

“Pakistani automakers haven’t really had much competition because their respective domains are well protected by monopolistic business practices,” Khan told AFP.

“But given VW’s impressive small-range of vehicles, the German automaker can take the market from the ground up and start working to the top.”

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Reader Comments (19)

  • Timorlane
    Aug 2, 2015 - 10:47AM

    Wish they come soon.

    We are really so very fed up with the

    thuggery monopoly of these

    Japanese assmeblersRecommend

  • Ali
    Aug 2, 2015 - 11:32AM

    “Suzuki Mehran costs the equivalent of $6,300 in Pakistan but sells for around $3,900 in India.” Pakistan has a far superior manufacturing industry compared to India, that is the reason we could manufacture our own fighter jets, tanks and many armaments – so if Pakistan fix few basic issues we could outshine Indian auto Industry in a very short span of time, and in fact we could even export vehicles to our neighbor countries – only thing is we should give our auto industry administration to our army which is manufacturing world class armaments…Recommend

  • Bilal
    Aug 2, 2015 - 11:41AM

    Seriously, Volkswagen or Ford or any other brand is more than welcome in Pakistan. Car sales are growing in double digits every year but the growing middle class is fed up with Japanese cars. Please we need some love from German cars too.Recommend

  • Atheist_Pakistani
    Aug 2, 2015 - 12:04PM

    Only if government provided funding for indigenous car manufacturer, it would be much better in the long run instead of profit being siphoned abroad.Recommend

  • Atif
    Aug 2, 2015 - 2:16PM

    @Ali

    Let’s accept the fact that our auto industry is efficenct and we should not be in denial.

    Do you know that the largest assembler Paksuzuki is selling obsolete vehicles from 1980s era which are no longer sold in any country outside Pakistan. No safety features are being offered in most vehicles (such as airbags). Neither do they meet any emissions standards.

    Let’s accept the fact – Pakistani made cars have no export potential. And don’t forget paksuzuki sends all its profits back to Japan.

    If things don’t improve we will keep getting obsolete vehicles dumped in Pakistan by Paksuzuki.Recommend

  • Pakistani
    Aug 2, 2015 - 2:47PM

    I wish! This Suzuki, Honda, Toyota trio monopoly must end! $6,300 for a Mehran is criminal. Even if you are extremely high salaried, you just cannot afford to buy a 1300CC car (which costs 13 lac+) in a reasonable distance of period; from that income. The other side of the game is played by the banks who are exploiting the buyer’s inability to make a direct purchase, and charging over the moon markup rates.
    I wish to see the day when the likes of Volkswagen will force Suzuki to sell Mehran for the price it deserves! Recommend

  • Aug 2, 2015 - 2:51PM

    I’ve written about it time and again.
    The passenger diesel market is completely vacant and up for grabs.
    The high-fuel efficiency cost-effective sub 1.3L segements also have no competition, over-priced products, and dismal quality products. Not to mention that most of the used imports from japan are the small/compact vehicles because of fuel-efficiency and a comfortable drive.
    .
    Lots & lots to do here, if only someone takes the plunge. Remember: no risk no gain.Recommend

  • TiffinBox
    Aug 2, 2015 - 3:58PM

    @Ali, really … India??. Dude high time you get down from your high horse and take a hard look round. The mehran which you talk about is Maruti 800 in India and has been out of production for years now. India has certainly moved on and is manufacturing better vehicles. Go on google and read about the Indian auto industry. FYI, India soon will be launching its home made first sports car the DC Avanti. See youtube.

    You think your manufacturing sector can match India’s? Not even in the next 500 years to come.Recommend

  • Ramallah Khan
    Aug 2, 2015 - 4:08PM

    @Ali:
    This shows the insecurity of every Pakistani person to immediately compare anything Pakistani with anything made in India. They Indians don’t care even 1% about comparing themselves to Pakistan while talking. Their comparison is with Japan, US or Korea. First compare yourself with smaller fish than taking a big leap.Recommend

  • Advait
    Aug 2, 2015 - 7:12PM

    @Ali : we are still waiting for your beloved water car. Please manufacture it and put all tHe traditional automakers out of business. Next you should manufacture Jinn powered fighter jets that will put lockheeds and boeings out of business Pakistanis can achieve anything. Recommend

  • Vectra
    Aug 2, 2015 - 7:36PM

    @Ali:
    Congratulation now give us a carRecommend

  • ZAK
    Aug 2, 2015 - 8:17PM

    I think VW can be successful experience in Pakistan.Recommend

  • ZZQ
    Aug 2, 2015 - 9:11PM

    New entrants needed badly to stop this monopolistic and exploitative behaviour by Japanese auto makers esp. Suzuki and Toyota.Recommend

  • Nishant
    Aug 3, 2015 - 6:05AM

    I doubt they’ll succeed unless they try some shady technique like government fleets etc

    I looked at the two wheeler segment in Pakistan and was shocked to see 10 different versions of of the same cd100 Honda motorcycle that went off sale in India around 10 years ago. There are no scooty for women at all.
    Two wheeler is affordable personal mobility, especially for women.

    Yes even the car market is kind of stagnant. Mehran should be retired, replaced by alto or something else

    And I know it won’t happen but at least assembly of car parts imported from India would be fine, but then lahori government is least interested in welfare

    I wonder if jaguars and land Rover are still purchased by the fat cats in Pakistan, now that it’s owned by Indian company Recommend

  • sharabi
    Aug 3, 2015 - 11:17AM

    @Ali
    Well if this dilution makes you happy than its good for youRecommend

  • N.S
    Aug 3, 2015 - 11:41AM

    @all. Many people commenting here seems to have very little knowledge about Honda, Toyota or Suzuki cars assembled/manufactured in Pakistan. Honda Civic assembled/manufactured here come with dual SRR airbags, navigation with built in tracker, inner and front camera, steering mounted cruise control, immobilizer, brake over ride system and many more features. The price ranges from 20,20,000 for I-Vtec manual to 23,74000 for VTI Oriel Prosmatec transmission. If you look at the car prices in US of a Civic at around 20,000 USD, and the dollar rate the price is same in US and in Pakistan. This is just a myth that prices are very high, the difference in price and specs is not there. Check the local website below.

    http://www.toyota-indus.com/grande

    http://www.civic.pkRecommend

  • N.S
    Aug 3, 2015 - 11:43AM

    Why AFP with report showing old pictures of FATA and Peshawar with old cars. They are hardly seen in Karachi, Lahore, Islamabad, Faisalabad or other big towns now. Recommend

  • Rizwan Ahmad Khan
    Aug 3, 2015 - 12:44PM

    What’s About FAW V2 thats have much facilities with lower price ?.Recommend

  • Afzal
    Oct 10, 2015 - 6:34AM

    @TiffinBox:
    O really….not even in the next 500 years ! If you do not stop deluding you will have a seizure. And BTW this Indian sports car you have mentioned probably has the technology preserved since the times of Ancient (Vedic) India when your encestors invented world’s first aeroplane.Recommend

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