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Current policy has no place for a German manufacturer: Audi

Country Manager Ali Khan explains why Pakistan will not see the foreign car brand until changes are made

Bilal Memon August 12, 2015

Country Manager Ali Khan explains why Pakistan will not see the foreign car brand until changes are made

KARACHI:

No one likes being restricted especially when there are options available.

Pakistani consumers, however, are when it comes to the automobile market. Dominated by Japanese brands, the auto sector - we speak of passenger sedan vehicles - offers a limited variety. This is where the segment of imported vehicles manages to make a mark and take advantage of the void.

While the influx of imported used vehicles has grown over the years - market data shows 39,000 of them arrived in Pakistan in fiscal year 2015 - the surprising bit is that sales of locally assembled vehicles have increased during the same time as well. From 82,844 units sold in 2008-09 - according to the Pakistan Automotive Manufacturers Association - the number has jumped to 151,134 in 2014-15.

Read: German car makers to buy Nokia map service for $3.1 billion

It is simple enough to realise that the market is hungry for cars and choices. Given the air was buzzing with reports of a German manufacturer making its way to Pakistan, The Express Tribune spoke to Audi, the German automobile manufacturer that oversees its operations in Pakistan through its exclusive importer Premier Systems (Pvt) Ltd.

Ali Khan, the Audi country manager for Pakistan and Bangladesh, said the current duty structure, which places imported vehicles in slabs according to engine size, needed to be revised.

“The system doesn’t work since cars have been divided in a wrong manner [in the duty structure],” Khan told The Express Tribune. “When you speak to someone in the government ranks with regards to the auto policy, they say that we are working towards “Vision 2025” where they see more entrants.

“But when you ask them who has been brought in to formulate the vision, the government says ‘their own experts’. No real expert from the advanced auto industries in other countries has been consulted.

“I know that the government is bent on bringing in a European manufacturer come what may. They want to say that they were the ones who brought a foreign brand in Pakistan.

“But I believe this is being done the wrong way. The Germans will not be able to build cars here since fuel emission standards, set by the European Union, are not being followed. The material, mostly aluminum, used in German cars is not present in abundance either. So completely knocked down (CKD) units is out of the question.

“The argument will then come down to whether Pakistan can set up a facility for a German manufacturer where semi-knocked down (SKD) units can be put together. But there is no policy that makes such a provision. Therefore, it’s the policy that needs to be updated before a German manufacturer can be asked to come here.

“Other countries in the region also import SKDs and have a clear-cut slab for it. They are then able to use the ‘made in’ label.”

Asked what it would take for German manufacturers to set up their plants in Pakistan, Khan simplified that all the country needed was to make a provision for importing SKDs.

Read: VW’s Audi to push up investment by $2.44b

“We asked them for a change in policy. Rumour has it that this auto policy will include the permission to import SKDs. If that happens, we would be the first ones knocking on their doors. In fact, Audi won’t be the only manufacturer to jump on this opportunity.”

Pakistan a ‘success story’

Meanwhile, despite Pakistan being restricted to only importing the vehicle, its market was labelled a “true success story” by Audi Germany.

“Pakistan is among the fastest growing markets in the region,” said Christine Bulang, sales manager for the South East Asia and Taiwan region, in an emailed response to The Express Tribune. “We definitely appreciate this development even the more since we are aware of the complexity of the market and its challenges.”

But Bulang added that while “Audi is constantly evaluating new opportunities on a worldwide basis, there haven’t been any investment plans into a plant in Pakistan.”

Published in The Express Tribune, August 12^th, 2015.

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COMMENTS (25)

doom | 8 years ago | Reply @Sodomite: That is some exceptional whataboutery. You have to be quite the mental gymnast to go from an article about automobile manufacture to clean-water-sanitation etc. But just so you know, I think you have misunderstood. The point is not to to give rich people nicer cars. It is generally helpful to have FDI coming in, getting manufacturing going, creating jobs, cheaper cars for everyone, and so forth, for clean-water-sanitation-health-education etc eventually.

Strategic Asset | 8 years ago | Reply @Buster: India has an advanced indigenous supply chain for automotive parts and many companies even export their products all over the world. For instance, Bharat Forge is the world's largest forgings company and has facilities not only in India, but also in Germany, Sweden & France. The VW Polo built in 2011 was 85% Made In India (few components were imported), but now 98% of it is Made In India. VW has its own plant near Pune and they train their own employees. VW's offerings in India compete head-on with Renault, Mercedes Benz, BMW, Hyundai, Chevrolet, Ford, etc. in addition to Japanese manufacturers like Toyota, Honda, Nissan and Indian manufacturers such as Tata, Mahindra, etc. Maruti Suzuki is also considered Indian because it is a listed company in India and they manufacture all their cars here in addition to reaching the state where they now design a few.

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Buster | 8 years ago | Reply @RT The question is who manufactures those machines which actually manufacture the Volkswagen. Secondly who trains those Indians on how to manufacture the Volkswagen. Until and unless you dont manufacture the whole supply chain you cannot claim it is pure Made in India.

lost | 8 years ago | Reply Pakistan requires arrival of more low to nedium range cars such as VW and Hyundai etc. Although i understand that there is a market for luxury vehicles but dont think its large enough to make assembling a viable option

Usman | 8 years ago | Reply @Saud Bin Farooq: we built the fighter because it was the need of the country and Army's admin was behind it. We cannot make a decent car because we need metro buses. sarcasm intended.

Usman | 8 years ago | Reply @Sodomite: you sir are a genius. Not only you are refusing to accept one of the best auto manufacturers to enter in Pakistan you are rejecting even the slightest possibility that they might set up a few plants and help grow our economy even more.

just_someone | 8 years ago | Reply @blah: Well, if you want one thing to be corrected, the engines are not from Russia, they are from the Ukraine. Now, I can go on and point out more rubbish in your statement but lets just say you dont know what youre talking about, even if you think or pretend to...

Timorlane | 8 years ago | Reply Japanese are generous people when it comes to throw corruption bones into the forever open mouths of Pakistani corrupt ruling class. Europeans however are bound by strict European laws to not use bribes and commissions for gaining business thus they are unfit for Pakistan the land of the corrupt and criminal ruling class

Fahad | 8 years ago | Reply "aluminum, used in German cars is not present in abundance". Aluminum is also used in Korean and Japanese cars and "is not present in abundance" in those countries (some are even using carbon fiber in the high end). Allowing SKD in the start maybe ok, but with a clear roadmap for initiating local R&D and production.

Basit | 8 years ago | Reply @blah: JF-17 is not assembled from any kit. PAC Kamra has all the CNIC and other advanced machines to manufacture most of the air frame of the JF-17. The engine and some other avionics are manufactured overseas, but the integration with weapons and avionics and flight testing, logistics support, developing tactics is all done in Pakistan. This is no small feat.

Shakil | 8 years ago | Reply Audi is VW brand, mass market of Pakistan will certainly need more choiced in middle income car buying sector. So VW cars may be the options to set up manufacturing plant in Pakistan. Going for AUDI brand to be assembled in Pakistan can only feed the export market but not locally. VW brands like VW and Skoda, Seat has great chance of success as they will compete very nicely with Hondas and Toyotas in price and market segments. other brands of VW likes of Audi, Porsche, Bentley etc can wait Ali is right in pointing out direct discrimination in import policy when it comes to european and asian brands. That law can be strike down in any court of law that differentiate between two cars as its direct discrimination against european cars even though not all european cars are expensive compared to Asian brands. Its the wrong policy and duty that make them expensive options. VW and Toyota compete neck to neck in price and market share in EU itself.

goggi (Lahore) | 8 years ago | Reply How many Pakistani car and two-wheeler drivers have an original licence obtained after going through a written and practical test? Those who haven't, are the promoters of the largest and very smoothly functioning institution of Pakistan i.e. BRIBERY!!! So its not the corrupt police, its primarily You and Me!!! The very high and dangerous smog levels in all our overpopulated and congested cities, the climate change and warming, the environmental pollution, the irreparable damage caused to ecosystems..........consequently we experienced recently a small sample of the consequences with thousands of sudden deaths and hundred thousands admitted in hospitals !!! All motor vehicles are for the environment as dangerous as chain smoking to human health! All young and old, males and females, PM and the postman should ride the environmentally friendly and health enhancing Bicycle!

shahid | 8 years ago | Reply @Actually: Its just a case of Listen and react, rather than read and analyse.. so much for knowledge.. Please dont blame Blah; that how he has named himself as such too; he is Blah . Blah ...; which means nothing nothing ... too much of nothing;

Actually | 8 years ago | Reply @blah The Boeing 787 uses British Rolls-Royce engines, Japanese GS Yuasa batteries and Italian Alenia stabilizers. Yet, it is still very much considered an American plane. I don't think you understand how aerospace manufacturing works. Your post smacks of jealousy and insecurity.

Shah(Berlin) | 8 years ago | Reply @Saud Bin Farooq: the sensitive equipment in JF17 are not manufactured in Pakistan. For tht sake even India is not that advance. Thus you cannot "make" the car if we are talking about complete R&D. On the other hand both the countries have the capability of assembling and producing less complex or critical part. Now the question comes about market approach which the perosn tried explaining. Regards

RT | 8 years ago | Reply Audi, Mercedes, BMW all have assembling units in India. Volkswagen however is the only German car maker which not only assembles but also manufactures it's cars in India. Made in India car of Volkswagen was showcased in Hannover fair during Make in India campaign when Prime minister Modi visited.

Usman | 8 years ago | Reply @blah: JF-17 is more than 80% 'Made in Pakistan'. More than India's DRDO Rocket, more than Tejas and much much more than India's Audis and Jaguars.

The Khan-Waterloo,Ontario | 8 years ago | Reply @Sodomite: Speak for yourself. If poor people can't buy a car then its not my fault. Many Pakistanis are rich through legal ways and it's our right to enjoy these luxuries

The Khan-Waterloo,Ontario | 8 years ago | Reply @blah: maybe Indians can outsource Tejas too (according to you) because i think those planes will only become operational when my children marry at the current rate (and i am 23)

Gullu | 8 years ago | Reply @Saud Bin Farooq:

I find it so hilarious that we can build an aerial combat plane on our own

If you mean jf-17 then that's made with chinese help not "on our own" Everytime something goes wrong people in Pakistan say that we should give the army more control or the airforce more control and so on. The military forces have one job and that is to defend Pakistan against external threats. It is not their job to reform each and everything that is wrong with this country and neither are they capable of doing that. We need to fix all the other institutions that are responsible for these things instead of calling in the military forces for each and everything.

blah | 8 years ago | Reply @Saud Bin Farooq No, you are not building aerial combat planes yourself. JF 17 is built by China, based in its Chengdu J-7, which itself is the license built version of the Soviet MiG-21. So, its not like building a new aircraft from scratch. The JF-17 engines are imported from Russia. Sure, the Pakistan Aeronautical complex just manufactures few parts for the aircraft, and the completed ones you claim to manufacture are actually imported kits from China. You can verify all these facts in any independent source. But we all know, I am going to be called a jealous Indian, or its all western propaganda, or look at your Tejas. What we can do when you guys are into such delusion, and living in denial? When someone says anything bad about your country(which is true), the only defense you got for the past 60 years is look at India, which is bigger many times in every possible way.

mani | 8 years ago | Reply I think SKD's should be encouraged as there is alot of room for more brands to invest......if the response against SKD's is good (and it will be more than just good) than afterwards Audi can set up their plants in Pakistan.

Saud Bin Farooq | 8 years ago | Reply I find it so hilarious that we can build an aerial combat plane on our own but cannot make a car? lets give the air force a task to come up with something of a challenge to make the best locally manufactured line up of vehicles to replace the rubbish known as Suzuki out of the market at-least.

Sodomite | 8 years ago | Reply 3 brands are sufficient for an IMF dependent country where large segment of its population do not have access to basic services, like clean water, sanitation, health and education. Those who have corruption made money can buy them overseas and bring them into Pakistan without paying customs and excise duty.

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